Getty Images
Dig yourself out high credit card debt is an important step for your finances, but in many cases it can feel like you’re standing in quicksand. The harder you try to escape, the deeper you sink, especially as interest charges increase over time. And with average credit card interest rates hovers above 23% currently – at an all-time high – even modest balances can quickly grow into overwhelming financial burdens.
However, the average household currently does not have a modest balance. Cardholders have an average of one credit card balance of approximately $8,000 and Americans together have about that $1.14 trillion in card debt currently. Given today’s record-breaking card rates and the high average balances many cardholders face, it’s easy to see how this type of debt could spiral out of control.
For example, if you carry the average credit card balance ($8,000) and your interest rate is 23%, you will pay approximately $152.62 in interest charges alone each month. That can be quite tough on your budget. The good news, however, is that there are strategies you can use to help you break free from credit card debt without destroying your credit score in the process.
Read more about your options for debt relief here.
How to get rid of your credit card debt without ruining your credit
Here are a few ways to get out of high credit card debt without destroying your credit:
Consolidate your debts with a loan
A debt consolidation loan This allows you to combine multiple high-interest credit card balances into one lower-interest loan. These loans are typically offered by traditional banks and credit unions and most debt consolidation loans are unsecured, meaning you don’t have to provide any collateral in exchange for borrowing the money.
By means of consolidating your debts in one loan, you have a set schedule for repaying your loan and only have to manage one monthly payment instead of multiple credit card bills. That, in turn, can simplify budgeting and reduce the risk of missed payments. And as long as you pay on time, this approach won’t hurt your credit score and it can even improve it by reducing your credit utilization.
Don’t wait any longer to tackle your high credit card debt.
Transfer your balance to a new card
Balance transfer credit cards offer low or 0% introductory interest rates on transferred balances for a set period of time, typically up to 21 months. By transferring your high-interest balances to one of these cards, you can make interest-free payments during the promotional period, which can speed up the debt payoff process and make it a lot easier. cheaper to pay off what you owe.
However, keep in mind that this is usually the case a balance transfer fee (usually about 3-5% of the amount transferred) linked to this option. In many cases, however, this compensation is worth it, given the savings you get on interest costs. Plus, consistently paying the balance on time can help protect and even improve your credit score, which is an added bonus.
Enroll in a debt management plan
A debt management plan is a structured repayment plan organized through a credit counseling agency. When you enroll in this type of program, the credit counseling agency negotiates with your creditors to lower your interest rates and waive fees. You then pay one monthly payment to the agency, which distributes the money to your creditors.
However, it is important to know that debt management may not directly affect your credit score, but does require you to close your credit card accounts, which may have an initial impact your credit utilization ratio and have a small impact on your score. However, as your debt balance decreases over time, your credit score will typically recover.
Take advantage of a debt consolidation program
Debt consolidation programs are offered by debt relief companies and work in the same way as debt consolidation loans. With a debt consolidation program, the debt relief company’s third-party partner lender consolidates your credit card debt into one loan with a lower interest rate.
By working directly with a debt counselor, you may be able to secure better terms on your loan avoid missed paymentswhich is beneficial for your credit score. And over time, paying off the loan will also help improve your credit utilization, which can also positively impact your score.
Get temporary assistance from a hardship program
If your financial situation has changed and you are having a hard time stay on top of credit card paymentsThen consider calling your creditors and asking for a lower interest rate or a temporary reduction in minimum payments. Some credit card companies may also do this offering hardship programs which can temporarily reduce or even suspend payments without affecting your credit. If negotiations are successful, it can ease the financial burden you feel and allow you to make on-time payments, protecting your credit score.
The bottom line
Paying off credit card debt without hurting your credit score can be achievable with careful planning and by choosing the right debt reduction strategy. From consolidating debt to working directly with your creditors, there are many paths to financial freedom that won’t leave a negative mark on your credit report. Remember that consistency is key, and even small steps can lead to substantial progress. So by focusing on reducing debt and maintaining on-time payments, you’ll be well on your way to a debt-free future while safeguarding your credit score.
