This Approach To Credit Card Debt Could Be Much Better Than The Debt Snowball

The debt snowball is a very popular method of paying off debt. This involves making additional payments on your debt, starting with the lowest outstanding balance. You will pay the minimum on all of your loans, but you will send additional money on the debt for which you owe the lowest amount.

Once this low balance debt is paid off, you will start working on the debt with the next lowest balance. Each month, the payment you previously made on the new loan paid off will be added to the next debt you pay off.

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Where does the snowball method of debt come from?

The snowball approach to debt was popularized by personal finance guru Dave Ramsey. He thinks paying off the lowest balance helps you stay motivated first because you get quick wins when you pay off debt.

Unfortunately, this popular deleveraging strategy can be an expensive way to pay off what you owe. This is because you might be spending a lot of time paying off low-interest debt before you even start taking on high-rate debt. This can happen if your most expensive loans also have high balances, so they are late in your snowball.

Rather than using an approach that might let you hold more expensive loans with higher balances, you might want to consider another method of debt repayment.

It could save you a lot more money than the debt snowball

There is actually an easier approach to paying down debt than snowballing debt, and it could end up being a lot cheaper. It’s about refinancing your debt.

If you can apply for a low-interest personal loan and use it to pay off most or all of your other debts, you could eliminate the question of which loans to pay off first. You would no longer have a whole bunch of different debts to prioritize. Instead, you would have a fixed rate loan with fixed monthly payments that you would pay each month. You wouldn’t have to worry about staying motivated or how quickly you pay off each debt as you would have demanded monthly payments which would result in your balance being paid in full at the end of the loan term.

If your refinance loan has a lower rate than your existing debt, you could also save a lot of money compared to the snowball method. Suppose, for example, that you have a large loan at 17% interest that would be far down your list of debts payable if you followed the snowball approach. Instead of paying that 17% rate for a very long time while you work to pay off cheaper debt, you immediately lower the cost of that expensive loan by refinancing.

Refinancing only makes financial sense if you can actually get a lower rate than what you are paying now. But if you have a lot of credit card debt, chances are a personal loan is much cheaper than the current rate on your card. It’s worth shopping around for refinancing quotes before considering the snowball approach to debt, so you can see if refinancing would be right for you.


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Ask Amy: Romance Crumbles Over Condo Sale, Credit Card Debt

Dear Amy: I dated my boyfriend for 18 months before deciding to move in with him.

I’m in his sixties and he’s in his early sixties.

When I moved in, he gave me his credit card. He said I should write down what I spent and we would each pay half of the total. The plan was to move together into a townhouse he was building. He said I couldn’t be on the house’s bill of sale and all of the furniture in the new townhouse was his. He told me that I should sell my condo and my furniture.

My condo is the only property I have.

He wanted me to give him $ 100,000 from the sale of the condo once it was sold. In return, he said he would take care of me when he died. He started treating me badly and accused me of pushing him into marriage. I didn’t like the idea of ​​not being on the deed, because when she died, her daughter could challenge the will.

I decided not to sell my condo and moved.

Now he wants $ 7,000, he says, which I owe him, from the expenses we incurred on the credit card. I don’t have any extra money, and he knows it. Can he sue me for the money?

He told me he would give me until December to pay him back!

– Wondering

Dear Wondering: Your ex can try to sue you for any reason, but that doesn’t mean he’ll win. He only wins if he can intimidate you with the threat of a lawsuit into giving him money you don’t think you owe him.

You should seek legal advice, but according to my own research, when he gave you his credit card to use, he was in fact violating his own agreement with the credit card company, which states that he is the owner of the card and responsible for paying the balance. If he wanted to share the map, he should have added you as an “authorized user”.

If you believe that you legitimately owe him $ 7,000, then you should repay that amount, perhaps in installments, if you cannot pay the full amount. If you don’t think you owe them that amount, then you need to negotiate how much you’re willing to pay.

However, given his financial quarrels and how your relationship fell apart because of it, if you agree to pay him any money, you should have a written agreement with him and keep careful records.

You have been wise not to become more involved with him.

Dear Amy: My friend and I have planned a trip to Costa Rica to celebrate my birthday.

Initially 10 people signed up to go and we all bought plane tickets.

We booked accommodation and car rentals with 10 people in mind; my friend and I pay most of it, with the agreement that we will all share the cost later.

Today, three weeks before the trip, three people gave up for various individual reasons.

Now I am scrambling to try and cancel rooms and car rentals to keep the cost down, as I had estimated a certain cost thinking of the 10 people, and now there are only seven left.

I don’t think it’s fair for the remaining customers to pay extra, because of those who have dropped out.

Should I ask participants who have dropped out to pay at least part of their bill? And if so, how to ask?

– Disappointed

Dear Disappointed: There is usually no charge for canceling or modifying rental car bookings with such long notice. Depending on the service you used to book your rooms, there should also be no charge for canceling rooms.

Those who cancel are obligated to pay for their own plane tickets.

Once you’ve calculated any cancellation fees you’re having, you can reach out to your friends to say, “I’m so sorry you can’t join us. Unfortunately, I have incurred the following costs, which I have just learned are non-refundable. Hope you are ready to pay me back.

Dear Amy: “Torn” suffered from early-onset Alzheimer’s disease and didn’t want to tell his sister about it. You agree with her!

You should have told her how selfish she was.

– upset

Dear Upset: “Torn” expressed the stress this disclosure would put her, and I supported him. I can’t imagine accusing him of selfishness.

You can email Amy Dickinson at [email protected] or send a letter to Ask Amy, PO Box 194, Freeville, NY 13068.


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CFPB Report Highlights Credit Card Debt Collection

The Consumer Financial Protection Bureau’s fifth biennial report on the consumer credit card market released in September examines a variety of hot topics, including how card issuers are collecting overdue debts and the increase in debt. digital engagement in the debt collection process.

From a peak of $ 926 billion in 2019, credit card debt fell to $ 811 billion in the second quarter of 2020, the largest six-month decline on record, before reaching $ 825 billion at the end of the year, according to the report. Credit card default rates also fell throughout 2020, erasing six years of increases.

Notably, the section of the CFPB’s credit card debt collection report found that issuers had policies in place detailing how often their collectors can call, leave voicemail messages, emails, and text messages. and otherwise contact a consumer regarding an overdue account. The average number of consumer contacts specified in the policies ranged from three to 11 per day, but in practice, issuers reported significantly fewer overall contact attempts on average per account than allowed by the policies: 1.25 at 2.99 per day.

Digital engagement, whether it translates into signing up for online portals, signing up for mobile apps, enrollment rates for electronic statements versus paper equivalents or electronic payment of credit card bills. credit, steadily increases across all age groups and almost all types of platforms.

The report found that since the 2019 report, issuers have lowered the range of their daily limits on debt collection phone calls for overdue credit card accounts while increasing the use of emails when calling. recovery.

The number of card issuers using text messages as part of their credit card collection strategy has also continued to increase since the bureau began tracking them. Less than two-thirds of those surveyed in 2019 said they had sent text messages to communicate with delinquent consumers, while almost all respondents said they had used text messages in the last survey period.

Two-thirds of issuers surveyed also reported interacting with delinquent consumers through “web chat,” often allowing consumers to negotiate settlements and make payment arrangements.

The CFPB also discussed how issuers use proprietary collectors to support internal collection activities.

“Most issuers who have used proprietary collectors have indicated that they do not place any specific sub-segments of accounts with proprietary agencies. However, a minority of respondents assigned higher risk accounts to owner collectors, ”according to the report.

On average, issuers reported holding 96% of pre-charge debt balances to be processed internally and by proprietary collectors, with the remaining 4% placed with third-party collectors.

Other key points to remember:

  • Over 25 million consumer credit card accounts representing approximately $ 68 billion in outstanding credit card debt entered relief programs in 2020, significantly higher than in previous years;
  • The share of accounts with a revolving balance declined in 2020, more consumers paid off their card debt in 2020, and existing cardholders paid off the highest share of their credit card debt in recent years;
  • Late payments and default rates have fallen to historically low levels, especially for consumers with scores below the premium;
  • Citing data from IBISWorld, the report shows that third-party debt collection industry revenues have declined in recent years from around $ 14.1 billion in 2013 to $ 12.7 billion in 2019; and
  • The industry continues to consolidate, with the number of debt collection companies decreasing by 30% and the number of debt collection establishments decreasing by 28% between 2011 and 2019.

Read the full report here.


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Four top tips from personal finance experts

It is one of the most common financial problems and one that can overwhelm you unless you pay close attention to your expenses.

Debt to credit card can feel like it takes on a life of its own when you’re not watching, and adding to it is too easy – dinner here, a little retail therapy there, chasing reward points for an airline, splashing around on this vacation… it all adds up. Worse yet, you find that you are doing this on multiple cards.

It’s time to take a deep breath and make a plan to pay off the debt you’ve accumulated. The independent talked with three personal finances experts on what they consider to be the best strategies to combat credit card debt.

Calculate your total debt and set a debt-free date

In order to pay off your debt, you first need to know exactly how much you have. Create a simple spreadsheet or use a personal finance site like Mint and itemize all of your credit cards, their respective balances, and interest rates.

This will help you clarify the scale of the project ahead and allow you to focus and monitor your progress. You might be surprised how quickly you can get to work paying off what you owe, and the difference a few small changes in your lifestyle can make if you use even small amounts to pay off debt.

Then set a deadline for yourself. When do you want to get rid of your debts? Danetha Doe, the creator of Silver & Mimosas, a financial wellness platform for the self-employed, says, “Once you have a date in mind, reverse engineer the process to determine how much you need to pay each month and which strategy is the best approach for you. you. “

Choosing a debt repayment strategy

There are not many ways to pay off your debt, so pick one that you think will work for you, but be aware that if you are struggling, you have other options.

The first approach is known as the “avalanche method” where you first pay off the card with the highest interest rate while paying the minimum amount on other credit cards. “Once you’ve paid off the first credit card, you transfer those monthly payments to the next credit card and so on,” Ms. Doe explains.

Loreen Gilbert, CEO and Founder of WealthWise Financial Services, note: “People have different opinions on how to tackle credit card debt. Some say pay the smallest first because it is an accomplishment. However, I think tackling the one that generates the most interest makes more financial sense. “

Paying off the card with the lowest balance is known as the “snowball method”. Likewise, as with the avalanche method, you pay the minimum amount on any other cards you own, and then after the first card is redeemed, you snowball those monthly payments onto the next card.

Ramit Sethi, the author of I will teach you how to be rich, is a fan of this method, and notes that if you feel like you’re not ahead of your debt, it’s a quick way to gain a sense of accomplishment in what for many is an uphill struggle.

He advises paying an extra $ 50 per month, either by saving money elsewhere or by making extra money through a side activity to cover that amount. Above all, while paying the minimum on your other cards, pretend they don’t exist to avoid getting into more debt.

Sethi says, “Paying off the credit card with the highest APR might be the best way mathematically, but you know what’s amazing? Pay a card. You’ll regain confidence, gain momentum, and be ready for a bigger challenge. Before you know it, you’ll have paid for it and you can upgrade to the next card.

A third method is to do debt consolidation. This is where you call your credit card companies and ask if they will consolidate your credit card balances into one card.

Ms. Doe notes that generally, if they do, they’ll offer a lower interest rate on the card. “This can be great for some people because it translates to just one payment per month versus multiple payments which can be overwhelming.”

As a last resort, she suggests filing for bankruptcy. “Sometimes it’s the only option for people to get out of overwhelming debt. Work with a legal expert to determine if this is the right course for you.

Consider a balance transfer

Depending on your credit score, some credit cards will offer you the option of transferring your credit card balance to a 0% interest rate credit card. Keep in mind that this 0% interest will only last for a short time, and once the period is over, the interest rate will skyrocket.

Ms. Gilbert notes: “Many people used to living beyond their means use credit cards to finance their lifestyle and then look to shift credit card balances to 0% interest cards. The problem is, the rates will not be low forever. It is therefore essential to control spending to get rid of credit card debt once and for all.

“If you transfer balances to a 0% offer,” she advises, “keep the same payment from your higher interest cards that you had to pay in order to reduce debt faster. “

Be tough on your spending

Use the time you spend paying off your debt to work on setting new financial standards for yourself that will hopefully leave you in better health.

“Until the credit cards are paid off, stop using the credit cards altogether,” says Gilbert. “Studies have shown that people spend around 20% more when they use credit cards than when they pay cash. So use cash and break the habit of spending more.

“By the time the credit cards are paid off, you have developed a new habit and you may not feel the need to use a credit card,” she adds.

“If you’re still having trouble sticking to your debt repayment plan, you may need to use a system like the Conscious Spending Plan to manage your spending,” suggests Sethi, referring to the Exact Planning Technique. of how you are going to spend your money up front and stick to it.

“You can also look for big wins that can unlock more income, like negotiating your salary or rent. By earning more (or spending less), you can pay off your debt faster, ”he adds.

Ms. Gilbert suggests a similar practical approach: “Eat half as much a week and use that money to pay off your debts. It may seem like a small amount of money, but that small amount of money can make a big difference. For example, if each meal costs you $ 25, you could pay off the debt of $ 200 per month.

Breaking a cycle of spending and accumulating debt may require a more introspective examination, says Doe. “If you find yourself in a cycle of credit card debt for an extended period of time, or if you are fluctuating between no credit card debt and high debt levels, it is wise to examine your mindset. “

She suggests examining your relationship with money and your beliefs about money to determine what financial behaviors you need to change.

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CFPB report reveals drop in credit card debt, new apps and increase in digital engagement in 2020

On September 29, 2021, the CFPB issued a Press release concerning its fifth biennial report to Congress As it concerns the consumer credit card market. The report found that the growth of the market in recent years reversed in 2020.

The report examines the market for potential harm to consumers and presents the latest research on the use, cost and availability of consumer cards. From a peak of $ 926 billion in 2019, credit card debt fell to $ 811 billion in the second quarter of 2020, the largest six-month decline on record, before reaching $ 825 billion at the end of the year.

“While public and private programs have helped consumers reduce their credit card debt during the pandemic, we at CFPB will ensure that families and individuals continue to struggle. [to] get the help they need, ”said Dave Uejio *, CFPB Acting Director. “Across the credit card market, consumers were seeking and using less credit, paying off debt, and lowering late payment rates to historically low levels. At the end of the pandemic relief efforts, the CFPB will use all of our tools to support a fair recovery. “(* Editor Remark: Thursday, September 30, 2021, the Senate confirmed Rohit Chopra as the new director of the CFPB.)

Since the passage of the Dodd-Frank Act in 2010, and in accordance with the Credit Card Liability and Disclosure Act 2009, the CFPB has submitted a report to Congress every two years on the state of the credit card market. consumer credit cards. The report released today highlights several metrics related to consumer credit card activity during the pandemic, including:

  • Over 25 million consumer credit card accounts representing approximately $ 68 billion in outstanding credit card debt entered relief programs in 2020, significantly higher than in previous years;
  • The share of accounts with a revolving balance declined in 2020, more consumers paid off their card debt in 2020, and existing cardholders paid off the highest share of their credit card debt in recent years;
  • The total line of credit on all consumer credit cards declined slightly in 2020 from a high of over $ 4.5 trillion after the Great Recession in 2019, but remained above 2018 levels;
  • The volume of credit card applications fell sharply in 2020 from its peak in 2019, with approval rates also falling, but not as sharply;
  • Late payments and default rates have fallen to historically low levels, especially for consumers with scores below the premium;
  • Consumers with lower than best scores saw the greatest restriction on the credit card line available, even as line usage declined;
  • Digital engagement, whether it means signing up for online portals, signing up for mobile apps, e-statement membership rates versus paper equivalents, or paying credit card bills electronically. credit, steadily increasing in all age groups and almost all types of platforms; and
  • Credit card issuers continued to make fewer phone calls for debt collection for overdue credit card accounts while increasing the use of e-mail for collection.

During the pandemic, many cardholders received direct federal assistance, improved unemployment benefits, and the suspension of payment and interest on student loans held by the federal government. Reinforcing these public efforts, credit card issuers have also provided relief to cardholders through payment deferrals and fee waivers. The report notes that it is still important for issuers to improve customer service and system reliability related to these relief programs and to ensure that their systems are operating in full compliance with applicable law, even if the Market continues to evolve with changing economic conditions as well as innovation in the card market and in competing product markets.

The CFPB indicated that the report reflects the continued work of the CFPB to ensure adequate consumer protection and a transparent and competitive market for all consumers, especially the most vulnerable. The report notes several specific areas of CFPB concern, including the failure of issuers to report payment amounts to credit bureaus and the practices of issuers with respect to credit line reductions, which will be the subject of review. additional work as the CFPB strives to promote fair recovery. The CFPB also intends to increase its use of demographic data in its future research.

InsideARM perspective:

Now that the Senate has confirmed Rohit Chopra as CFPB Director, it will be interesting to see the next steps the CPFB takes regarding these issues. Based on Mr Chopra’s previous stance on consumer issues, it is likely that he will continue the initiatives launched by interim director Uejio.


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The Fastest Ways To Pay Off Your Credit Card Debt

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Credit card debt is a financial plague because it can quickly get out of hand due to high interest rates. However, sometimes it can be difficult to avoid getting into debt. This was especially true for many Americans during the coronavirus pandemic, as spiraling unemployment and stay-at-home orders created widespread financial hardship. If you find yourself burdened with credit card debt for any reason, take a look at these tips to help you pay it off faster.

See: Why it’s always better to use your credit card over your debit card
To learn: The best purchases you should always do with a credit card

Stop using your cards

It’s hard to pay off your credit card debt when you keep using it. For those in the midst of a financial crisis, this can be hard to avoid, but if you only spend on your cards out of habit, you may never get out of it. If you really want to pay off your credit card debt, switch to cash or, at the very least, spend only what you can afford to pay each month.

To verify: 90 seconds to increase your credit score 200 points

Increase payments

Simply paying off what you spend on your credit cards isn’t enough to get you out of debt. You will need to increase the amount you pay if you want to make progress in reducing your debt. It can also be difficult to do if you’re struggling financially, but think about how you can cut your budget to get as much of your credit card debt as possible. Even an extra $ 10 or $ 20 per month could help lower the long-term cost of your credit card debt.

Read more: This simple trick will improve your credit score and avoid late payments
Discover: What is a good credit score?

Use a 0% balance transfer offer

If you can’t quite pay off your debt right away, you can at least save some time by taking advantage of a 0% balance transfer. Typically, these types of balance transfer offers last for one year, and sometimes up to 18 months. If you’re temporarily behind on your debt repayments but anticipate better times ahead, this might be the kind of respite you need. Keep in mind that most balance transfer offers advertise a 0% rate but also charge a 3% to 5% fee at the time of transfer.

To learn: 10 things to do now if you have a credit score of 500

Consolidate into a lower cost loan

Rule # 1 when it comes to paying off credit card debt is to stop the bleeding as soon as possible. In addition to stopping your credit card spending, moving your balances to a lower cost loan can be a temporary help. Even though you’ll continue to earn interest on your debt, lowering your interest rate can help slow the cumulative effect. For example, if you have $ 10,000 in 18% credit card debt and consolidate that into a 6% personal loan, you could save $ 1,200 per year in interest charges.

Discover: 10 credit score myths you need to stop believing

Negotiate with your creditors

Most people accept the interest rate set by their credit card company without thinking twice. But you might be surprised to learn that you might be able to negotiate that interest rate down. While you may not always be successful, it never hurts to ask, and if you are a long-time customer with a solid payment history, your odds may increase. A reduction of a few percentage points on your interest rate could save you a lot of money.

In the worst case scenario, in which you simply cannot pay your cards, you may be able to achieve some type of negotiated settlement with your creditors. This will damage your credit score, but can be a way to reduce your overall debt and put in place a reasonable long-term payment plan.

More from GOBankingTaux

Last updated: September 30, 2021

This article originally appeared on GOBankingRates.com: The Fastest Ways To Pay Off Your Credit Card Debt


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42% of American adults have increased their credit card debt since COVID-19 started

Bankrate.com conducted a survey on the subject of rising credit card debt in early September. Nearly half of people in debt before the pandemic have seen it increase since March 2020.

The research involved 2,400 adults. More than half of them, 1297, had credit card debt. 47% of adults who said their debt had increased since the start of the pandemic linked the cause of the increase directly to the pandemic.

These conclusions contrast sharply with the latest Federal Reserve data. The Federal Reserve says credit card debt has declined significantly overall. This leads to the conclusion that these financial improvements are not universal.

“This shows how widespread and persistent a credit card debt problem can be,” said Ted Rossman, senior industry analyst at Bankrate.com. He added that the Bankrate survey clearly shows that the financial improvements “have not been shared equally by households”.

With an average annual percentage rate of around 16%, it’s no surprise that credit card debt isn’t something that people can easily get rid of. Another disturbing statistic from the survey is that the average person with credit card debt owes $ 5,525.

The survey also pointed out that 54% of adults carry their balances month to month. Half of these people have been in debt for at least a year.

Rossman said, “It tends to be a long-term type of systemic thing,” and explained some of the steps people in debt could take to get rid of it. He mentioned that borrowers can consolidate their debt with a personal loan. Another option might be to wisely reduce their spending and budget to include higher debt payments. He also believes that with the economic recovery, many banks will resume offering excellent 0% balance transfer offers – something that had dried up during the pandemic.

The Bankrate survey also asked when participants expected to be released from their debts. Most of them had a positive outlook: 30% expect to deleverage within a year, and 60% believe it will take them five years. One in 10 participants were unsure of the deadline, and only 5% were concerned that they would not be able to take on debt at all in their lifetime.


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3 ways to get rid of your credit card debt by the end of the year

Sometimes the circumstances of life cause you to run out of money. When this happens, your credit cards can come in handy to pay for essential expenses that can’t be postponed or avoided, like food, medicine, and utilities.

If you’ve racked up credit card debt this year, you’re probably in good company. After all, many people still haven’t fully returned to work, and inflation has made everyday expenses like groceries and gasoline more expensive in general. But if you want to end the year debt free, here are some steps you can take to make it happen.

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1. Get a tighter budget

Keeping a budget is a good debt avoidance strategy. After all, if your expenses are clearly defined for you, you’ll be less likely to overspend.

But if you’ve ever been in debt, you may need to be more stringent with your budget to free up some extra money to pay it off. Take a look at your spending and see if there is leeway to reduce spending. This could mean temporarily canceling a streaming service or being more frugal at the supermarket – look for things that match your specific situation.

2. Choose a secondary activity

You may already be living a rudimentary lifestyle and have no expenses that you can cut back. But if it does, you are not doomed to stay in debt. If you can get a sideline on top of your main job, you can use the proceeds from that gig to reduce your balance.

Keep in mind that having a sideline doesn’t necessarily mean committing to set times. Nowadays there are many concerts that you can do independently. You can request to write or edit content from home, drive for a rideshare service, or sign up for pet or house sitting when it’s convenient for you. And these are just a few examples.

3. Make a balance transfer

The less interest you earn on your credit card debt, the easier it will be to pay it off. And to that end, a balance transfer credit card can help.

When you make a balance transfer, you are transferring your existing balances to a new credit card with a lower interest rate. You may, in fact, be able to get an introductory 0% APR on your balance transfer. A balance transfer is especially worth pursuing if you have decent credit. (If your credit is lower, you might have a hard time qualifying.)

End the year on a good financial note

A lot of people like to start a new year with a blank financial slate, so you might be motivated to get rid of credit card debt by the end of 2021. The good news is that there are several tactics you can take. use to achieve this goal. And remember, even if you can’t seem to get rid of it all of your credit card debt before 2022, if you reduce your balance, you will always end the year in a better position.


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Manage Credit Card Debt Better With These Tips Item

FORT LEONARD WOOD, Mo. – Fall is here, and with it comes the annual holiday shopping season. While credit card debt can pile up at any time of the year, people tend to spend a bit more when looking for the perfect gifts for their friends and loved ones. Americans averaged over $ 1,000 in vacation debt last year, and the majority said they wouldn’t be able to pay off if they were turned off by January.

Below are some tips for avoiding or reducing credit card debt.

Make a budget and stick to it

It’s hard to spend within reason or plan for savings if you don’t know how your monthly spending compares to your take-home pay, or where that money is going. That’s why you should categorize your expenses – including debt payments, emergency fund contributions, and other savings – and cut back on fat, if necessary. Most importantly, once you’ve developed your budget, stick to it.

Create an emergency fund

With a cash safety net to lean on, you aren’t as likely to fall behind on your bills for urgent expenses or unexpected unemployment. Your goal should be to gradually save about a year of after-tax income. In other words, reserve a little every month until you have a good cushion.

Improve your credit

This might sound a bit counterintuitive, as more credit could mean more debt. But improving your creditworthiness will have a huge impact on the cost of your debt. And lowering the cost of your debt will help you pay it off faster. Better credit can also make it easier to find a job or a home, which impacts your bottom line. You can check your latest credit score for free and get personalized credit improvement advice at www.wallethub.com, and you can retrieve your credit report at www.annualcreditreport.com.

Try the island approach

The Island Approach is a strategy of using a collection of credit cards, each serving a specific purpose. For example, you can transfer your existing debt to a zero percent balance transfer credit card to save on finance charges and get out of debt faster. And you can use one or two rewards cards – maybe one with travel rewards and one with cash back, or maybe an in-store credit card – for purchases that you can redeem by the end of the. month. This will allow you to get the best collection of terms possible. It will also tell you when you are overspending. The finance charges on your current spending cards will signal the need to cut back.

Pay off your most expensive debt first

Most people with severe credit card debt have multiple balances. If this is your case, try the “avalanche method”. This means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum required payment on the rest. Once your most expensive debt is paid off, repeat the process until you are debt free.

Assess your professional situation

In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to determine if there are more rewarding opportunities for people in your profile or consider learning new skills to make yourself more marketable. It may take a bit of investment in yourself, but as long as you get a good return, it’s money well spent.

(Editor’s note: The appearance of external hyperlinks does not constitute an endorsement or recommendation by the U.S. military.)


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3 reasons you keep ending up with credit card debt

Some types of debt are healthier than others. Mortgage debt, for example, is considered a good type of debt because it eventually allows you to own an asset that may increase in value over time. Credit card debt, on the other hand, is one of the less beneficial types to acquire. If you continue to accumulate more debt, it could be due to these habits.

One Email a Day Could Save You Thousands

Expert tips and tricks delivered straight to your inbox that could help save you thousands of dollars. Register now for free access to our Personal Finance Boot Camp.

By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our privacy statement and terms and conditions.

1. You are not following a budget

People who do not budget for the family risk spending more than they can afford without even realizing it. If you don’t have a budget, you may not be in control of your bills, which could lead to additional expenses and a sky-high credit card balance.

Better bet? Spend some time examining your bank and credit card statements to see what your spending looks like. Then make sure you earn enough to cover them entirely. If you don’t, you may need to make some immediate changes, whether that’s reducing your living space (if at all possible) or cutting back on your leisure expenses.

2. You only check your balances at the end of the month

A lot of people don’t log into their credit card accounts to see what their total spending looks like until their bills come due. It is a mistake. If you wait until the end of the month or the end of your billing cycle (which may not coincide with the end of the month), by the time you realize how much you’ve spent, you may already have to carry a cheeky balance.

It’s a good idea to check your credit card spending every week. Pick a day each week to log into your accounts and see what your total charges look like. If by the middle of the month you find that you’ve already spent more than you’re comfortable with, this will alert you to be frugal until your next billing cycle.

3. You allow too easily to give in to impulse buys

Many of us make unexpected purchases on a regular basis, whether it’s in physical stores or online retailers. But there is an easy way to avoid the latter and keep your credit card charges to a minimum – don’t store your credit card information on any of your electronic devices.

If you’ve saved your credit card details to your phone or laptop, it’s all too easy to make a quick purchase and then move on. But if you don’t keep this information handy, that alone can deter you from making impulse purchases – and accumulating more debt as a result.

Sometimes credit card debt is hard to avoid. If your working hours are reduced or you are faced with a series of unforeseen expenses, you may have no choice but to accumulate a balance. But if you want to reduce your chances of that happening, try to stick to a budget, check your spending every week, and make it harder to make unexpected purchases on the fly. These simple steps could do wonders for your finances and help you avoid accumulating debt or adding to the pile you already have.


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