What to Do When You’ve Got Too Much Credit Card Debt

credit cards

So you woke up this morning and it finally hits you that you have too much credit card debt. You’ve seen the signs for months, but you’ve been ignoring or don’t know how to deal with them. And now you feel stuck and overwhelmed.

What can you do? Below are 5 steps to take when you’ve got too much credit card debt.

1. Get a lower interest rate immediately

The first thing you want to do after coming to grips with your credit card debt, is to look for ways to get a lower interest rate. Call up your credit card company or lender and ask for a lower rate.

They won’t always say yes, but if you ask nicely and prove that you’ve been a good customer, you’ll have a really good chance of winning your negotiation. With one phone call you can save hundreds of dollars in interest payments, so it’s definitely worth a try!

Another option is to utilize debt consolidation to lock in a lower interest rate. Debt consolidation allows anyone who’s having issues managing multiple debts, to combine them into one payment, often with a much lower interest rate. This makes it a lot easier to manage one loan rather than multiple bill payments, while saving you money.

2. Work out a payment plan

If you follow the steps above and still find you aren’t able to make the minimum payment, it’s time to look for more creative options. For starters you can ask for a deferment on your payments, or work out a new payment plan with the financial institution. Often times they will be happy to get any amount of money versus not receiving anything.

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You can also decrease your monthly debt payments by using a balance transfer promotion. You’ll probably have to pay a balance transfer fee (often 5% of the total balance) but it could be a lot lower than the 20% or more you’re currently paying in interest.

3. Allocate income towards debt

Once you’ve lowered your interest rate and have your minimum payments under control, it’s time to make a plan with ReadyForZero to see how much you can actually pay each month. Of course the faster you can pay down your debts, the sooner you’ll be debt-free and be able to regain control of your financial life.

But allocating a certain amount of your income every month to your debts isn’t easy. And that’s where ReadyForZero makes it simple to assess your situation, create a plan and view your progress each month.

4. Limit your spending

Now that you’ve got a plan in place, it’s time to stick to it — no matter what. If you don’t have a budget, or spending plan, in place, now’s the time to do so. You need to limit your spending to only the essentials, and prioritize paying down debt at the top of your list.

In order to see what the essentials are, you need a simple template for budgeting. Check out this spreadsheet we made just for you! A budget is important for a few reasons. It shows where your money’s going and a complete overview of your spending, so you know where to cut back.

5. Find inspiration to keep going

Finding the motivation to keep going after months, or years, of paying off debt is tough. But one of the things that kept me going was the community of people I had around me for support.

For motivation, look to loved ones or friends who have been through this process, as they can help you get through the low points. You can also find inspiration by creating a dream board of goals that you’ll be able to accomplish once you are financially free.

In the end, if you’ve done everything above and still find that your debt is too much to bear on your own, you can look into debt reduction alternatives. No matter what, we’re confident you can become debt free.

Image Credit Josh Kenzer

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  • Molly

    YNAB is a great budgeting tool as well; similar to the spreadsheet but slightly more robust.

    • Yes, we like YNAB too! It does cost money, but for some people the extra functionality is well worth it.

  • Great post, Carrie. Very simple to follow steps for people who have credit card debt that they aren’t paying in full every month. Now they’ve got no excuses!! 🙂

    • Glad you liked the post! These are definitely solid steps for anyone who is working to pay off their credit cards.

    • Glad you found it motivating!

  • Stapler Confessions

    For those who don’t want to talk about their debt with friends and family, they can get motivation for from all the bloggers writing about their experiences paying down debt — those who are in the thick of it and have already succeeded.

    • Yes, that’s a great point! There are quite a few people who have blogged about their journey as they pay off debt — including right here on this blog. 🙂

    • Jenny M.

      If you really have that much debt (which you shouldn’t ever get into in the first place), it’s time to take drastic measures. Cut your living costs to almost nothing:

      1) Buy food in bulk.. dry food.. frozen food.. whatever is cheap. It might not taste good, but it’s cheap and is a temporary solution until you pay off your debt.

      2) Cut all cable TV, internet, gym memberships, whatever else is a monthly expense that you don’t need. Get a cheap $20/month cellphone from Tmobile.

      3) Cut transit costs. Drive a cheap car (or better yet, none at all). Use InsurancePanda for insurance ($24/month). Use Gas Buddy for gas (save $100/month). If you have access to public transportation, sell your car and use it.

      4) Ask your landlord to lower your rent or move to a cheaper place. Live in a box if you need to. Insure your stuff with $10/month renters insurance (from Eagle). Get roommates.

      5) Don’t get haircuts, manicures, your nails done, or whatever luxuries you indulge in until your debt is paid off.

      6) Try to spend $0 each day. If you don’t need it, don’t buy it. If it’s free, take advantage!

      Desperate times call for desperate measures.