UPDATE AT THE END:Hi, I’m a 29-year-old man living in Phoenix with about $15,000 spread across seven credit cards. Two of these cards have balances of $4,000 each. Would it be wise to stop paying the cards that are maxed out and use those minimum payments to pay off the others? I know this will hurt my credit score, but I’d rather have some cash and start addressing my financial situation. I earn $50,000 a year, but with interest and minimum payments, my debt has piled up to a point where I can’t get ahead.
edit : I contacted each credit card company, and the first two reduced my APR to 9% for six months and lowered my minimum payments to $15. Then, US Bank referred me to a debt management plan, which reduced my payments for the other four cards (totaling $12,000 in debt) from $650 to $250 a month. Thank you all for the advice; this feels much more manageable now. Edit: The Apple Card is the only one that didn’t work with me, but they did pause my payments for 60 days.
Similar circumstances a mounting credit card debt and no idea how to handle it have happened to me. Although it feels overwhelming, I discovered that even a simple plan allowed me to regain control.
You have two options: refuse to pay and accept a settlement after they put you in collections. Call and be specific in your wording (e.g., I want to pay off my credit card at 50%) and they will bargain). Make sure you receive a letter from the debt collector prior to the agreed-upon payment amount. They can always return for the remainder if not!
The debt won’t go away if you stop making payments on some cards in order to pay off others. By producing documentation that proves your ability to pay, you’re decreasing the likelihood that the credit card companies will cooperate with you.
Although I can appreciate your desire to cut down on the number of cards, you ought to start with the ones with the highest interest rates. Select the card that has the highest rate and make it your goal. Go through a lot and look for ways to get money in order to get rid of that card first. Proceed through the list. It will become increasingly simpler until you have no debt.
Have you attempted contacting the credit card company to inquire about any programs they may offer for people in need?
I am aware that the majority of them have a reduced interest option. It appears that they are open to collaborating with you further before missing or being late with payments.
My two Amex cards are subject to a 9.99% APR plan that lasts for 48 months. My life has been saved by the reduction in my monthly payment as well. While I’m participating in the plan, my cards are locked, but as long as you make your payments, they won’t terminate the account.
It will take some time, but it is achievable if you make $70,000.00. How much do you spend? Examine each card individually to see your interest rates and balances. When you pay off one credit card at a time, you can create goals to motivate yourself to keep going. You can discover a mathematical way to pay off the cards with the highest interest rates first, then pay the minimum on the other cards and work your way down the list. Or choose the card with the lowest balance and pay the minimum on the others; you might end up paying more in the long run, but the modest victories you receive early can spur you on to continue moving up the ranks from the lowest to the largest.
I am currently paying off debt of approximately $60,000. I would have completed Chapter 7, but I would have lost my job dealing with the unscrupulous debt buyer of the other accounts. I’m just dealing with the creditors directly. I had to take the settlement path as a result.
When I was unable to make minimal payments any longer, one of my credit card companies offered me a debt counseling service. In order to help me pay off the balance, they also arranged for a period of time during which there would be no interest. This ultimately saved me. After that, I transferred the remaining amount to my bank using their credit cards and received 0% interest for a while. Never quit up; there are many alternatives available besides filing for bankruptcy.
Absolutely don’t do that. There are better ways to get out of debt without ruining your credit and mental health. Trust me, the stress and harassment from creditors is tough to handle.
I was in a similar situation with about $29k in credit card debt spread across 8 cards, plus another $28k in consolidation loans. I earn around $70k a year. I joined a debt management plan, which helped lower my monthly credit card payments from around $2k to $650. Most of my interest rates are between 1-2%, with one at 10%. The repayment period is just over 4 years, but you’ll need to close the credit cards. My credit score dropped a bit when I started the plan because it lowered the average age of my accounts, but it’s slowly improving now that my balances aren’t maxed outit’s up over 50 points since I started.
Another option could be debt consolidation loans, but I wouldn’t recommend them unless you have a solid plan to stop using your credit cards. I made the mistake of getting consolidation loans and then racking up my credit card balances again, which led to more loans and eventually I couldn’t keep up with my payments.
I’m in a better place now, as I’ve addressed my undiagnosed ADHD that caused impulsive spending, but I’m not opening any new credit cards until I can prove I can control my spending for longer periods. I suggest you do the same, no matter which path you choose.
Also, check with your employer about any programs they might offer. Debt management companies often charge setup and monthly fees. I got my setup fee waived through my employer’s partnership, so I only pay $69 a month for the plan, which is nothing compared to the savings on interest.