How to Organize Credit Card Debt

If you wish to organize credit card debt, it is honestly much easier than it sounds. There are many options available if you have credit card debt, and you should not be scared of asking for help. Here, we provide several techniques that help you understand how to properly organize credit card debt so that you can eliminate your credit card debt and once again be in a solid financial standing.

Organize Credit Card Debt

Consolidation:

When you consolidate debt, you are basically compiling all of the debt you owe under one single loan. When you organize credit card debt in this way, the single loan pays off all or most of your outstanding debt and makes to make it easier for you to pay off what you owe. Instead of making many monthly payments with four or five different credit cards, you make only one monthly payment.

When you consolidate your debt, you should factor in what you wish to achieve. Things that debt consolidation might relieve you of are:

  • High interests rates
  • Expensive monthly payments
  • Short loan terms

However, be cautious of debt consolidation if you are primarily concerned with high monthly payments or long-term loan terms. Oftentimes, people who enter a debt consolidation agreement still have access to the credit cards that got them into debt into the first place. Once the cards are technically paid off through the consolidation, you can still use the card to charge new purchases.

Cut Up The Cards:

If you are recovering from a lot of debt, you should only have one credit card and that credit card should be saved for emergencies only. So, when you want to organize credit card debt, you should really consider which card(s) you need, and which cards are luxury. Store credit cards, gas credit cards, and cards with yearly fees can typically be cancelled or cut up to keep you from using them. Likewise, if you have a rewards credit card, but don’t actively use the rewards, consider getting rid of it.

Transfer Balances:

Every now and then, you might get a letter in the mail from a credit card company soliciting you to open up an account by transferring your current balance. Some of these solicitations are scams, but other times balance transfers can be beneficial.

For instance, if you have a significant amount of debt on one credit card, review the fine print on your credit card agreement. You might be incurring additional fines for having an amount over your credit line. Or, you might have a very high interest rate. Regardless, before you consider transferring balances, ask yourself the following questions to gauge if a transfer of debt from one card to another is truly a good idea:

  • How much is my monthly payment?
  • How much of my monthly payment is paying off interest?
  • Does my current rate apply to transferred balances?
  • Does my current rate apply to new purchases?
  • What fees are associated with transferring balances? (A new or old creditor can charge transaction fees when you transfer a balance. Fees can range, but incurring a 1-4% fee is not unlikely when transferring balance.)
  • What other types of credit fees must I pay? (These might include late fees, over-the-limit fees, or an annual fee.)

Having answers to each of these questions is important if you are thinking of transferring credit balances as means to organize credit card debt. If you are unable to answer any of these questions by reading your credit card statement, you should contact your creditor directly. Often, the fine print on your statement is clouded with jargon and difficult to understand. Also, terms may appear as different words, but have the same meaning. Depending on what terminology used, a “standard monthly fee” might mean the same as “monthly charge.”

Furthermore, you should inquire your current credit card company concerning cash advances. Oftentimes, balance transfers are subjected to the same exact rules as cash advances. Some companies even equate balance transfers to cash advances, which are quite expensive.

Read And Understand Your Rights:

Again, it cannot be stressed enough that you must read and understand every single thing in order to correctly organize credit card debt. The simplest of errors may turn into the costliest of errors. Knowing your rights will help you in the long run, and make you more prepared to organize credit card debt.

Below are common errors that can end up leading to increased cost:

  • Cancelling cards before applying for a loan
  • Ignoring debt after consolidation or balance transfer
  • Not knowing balance rates and fees
  • Failure to pay credit card minimums prior to transfer completion
  • Telling your creditor that you’re leaving before paying off the balance
  • Missing monthly payment due dates (either by a few days or completely)
  • Thinking that consolidation or balance transfers allows you to continue racking up credit card debt