4 smart ways to get out of credit card debt, according to experts | CBS News
Credit Card Debt: A Rising Concern
Let’s explore the world of credit cards. They’re handy tools for making purchases, but they come with a price. The Federal Reserve has been hiking up rates since March 2022, pushing the average credit card rate from 14% to 21%. These high rates can make paying off credit card debt challenging, especially as interest compounds each month.
Michael Liersch, head of advice and planning for Wells Fargo, advises not to ignore your debt. “You can’t just pray that you’ll win the lottery; you have to address it,” he says. So, what can you do if you’re one of the many Americans grappling with credit card debt? There are several strategies to consider.
Debt Management Plan
One option is a debt management plan offered by credit counseling and debt relief companies. These companies negotiate with your credit card issuers to secure lower fees or a reduced interest rate and then create a payment plan for you. The goal is to pay off your debts within a few years using consistent, stable monthly payments. Michael Sullivan, director of education at Take Charge America, says, “It will save money and pay off debt, but the real benefit is assistance in getting off the credit card bandwagon and learning to live on a budget.”
Debt Consolidation
Another strategy is debt consolidation. You take out a loan to pay off your balances across all credit cards, rolling them into one loan balance. This allows you to make just one payment a month, typically at a fixed interest rate. Howard Dvorkin, chairman of Debt.com, estimates that consolidating your credit card debts can reduce your total payments by 30 to 50%, depending on your balances.
Debt Settlement and Bankruptcy
Debt settlement and bankruptcy are other options. Debt settlement involves negotiating with credit card issuers to settle your accounts for less than what you owe. Bankruptcy, on the other hand, is the “nuclear option,” as Dvorkin puts it. It can wipe your debts clean but comes with many repercussions, including a significant impact on your credit for seven to 10 years.
The Bottom Line
There are many options for tackling debt, so weigh yours carefully. “Don’t sign up for more credit cards,” Dvorkin warns. Instead, carefully monitor your expenses and spending habits to prevent falling into debt again. “Learn from the mistake,” Liersch advises. “Your goal is true transformation.”………
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Rising Dough
Consider the role of credit cards in our economy. How do they influence consumer behavior, and how does this impact businesses and the broader market? I’d like you to reflect on how the strategies for managing credit card debt might affect these dynamics.
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Credit cards drive consumer spending by offering convenience and rewards, benefiting businesses. Yet, excessive debt can strain consumers, impacting spending and savings. Managing credit responsibly is key for financial stability, benefiting both individuals and the broader economy.
credit cards drive customers into an erg to spend due to the fact that they think it’s “not” affecting them. When in reality it is, big time. This affects businesses because they are the ones who accept credit card payments, I’m sure if less accepted credit card debt wouldn’t be a problem.
Credit cards allows you to use the banks money and you pay it back yo earn credit and credit can be used in a multitude of applications. This helps the consumer by basically having this way for the bank to know you are trusted with their money to others alike and to banks because they will get that money back plus interest so essentially gaining money either way. If you know how to manage you credit card and build your credit, that’s cool but if you don’t know how to, you are in trouble and the banks can take advantage of you.