Millions Facing High Credit Card debt Find Paths to Relief
NEW YORK – As Americans grapple wiht persistent inflation and economic uncertainty, credit card debt is soaring, with balances exceeding $1 trillion for the first time ever. For those carrying over $10,000 in credit card debt, navigating a path to financial freedom can feel overwhelming. However, several strategies offer viable solutions, ranging from structured repayment plans to debt negotiation.
Here are four ways to get help with credit card debt exceeding $10,000:
1. Balance Transfer Cards: A balance transfer involves moving high-interest debt to a new credit card with a 0% introductory APR. This can provide a temporary reprieve from accruing interest,allowing borrowers to focus on paying down the principal. however, these promotional periods eventually end, and interest rates jump back to standard levels. This strategy is most effective with a solid repayment plan to eliminate the balance before the promotional term expires.
2. Debt Management Plans (DMPs): offered through credit counseling agencies, DMPs involve working with a counselor to create a budget and negotiate with creditors to possibly lower interest rates and waive certain fees. Borrowers make a single monthly payment to the agency, which then distributes funds to creditors.
3. Debt Settlement: For those with significant debt and limited repayment ability, debt settlement involves negotiating directly with creditors - often through a debt relief company – to reduce the total amount owed, typically by 30% to 50% or more, in exchange for a lump-sum payment. While potentially resolving debts faster and for less, debt settlement can negatively impact credit scores and may result in fees and taxes on the forgiven debt.
4. Debt Consolidation Loans: These loans combine multiple debts into a single loan with a fixed interest rate and monthly payment. This can simplify repayment and potentially lower the overall interest paid. Though, it’s crucial to compare rates and terms carefully, and avoid secured loans that put assets at risk.
Taking action now is crucial, experts say. “The most significant thing…is to take action now rather than waiting.That first step is frequently enough the hardest, but it’s also the most powerful,” says Angelica Leicht, senior editor for the Managing Your Money section for CBSNews.com.
