Credit card debt is expensive and stressful, so it’s no surprise that many people who find themselves with significant credit card debt are willing to try almost anything to get that debt under control. The commitment to conquering credit card debt is great, but without a solid strategy, it’s surprisingly easy to make things worse.Avoid these five common credit card debt mistakes:
- Getting further into credit card debt: It may sound obvious that if you are already struggling with credit card debt, the last thing you need is more credit card debt. However, many people who have significant credit card debt are also facing other financial difficulties. Shifting balances between cards or making a credit card payment and then using the credit card to pay another bill so those dollars can do double duty is a trap, and will only extend the cycle of debt.
- Avoiding the credit card company’s calls: Talking to a creditor when you can’t make the payment they’re looking for is always uncomfortable, but it’s in your best interests to pick up the phone and explain your situation. Often, credit card companies will be willing to eliminate late fees, temporarily reduce payments, or otherwise work with you to get back on track. If you ignore them and skip payments, all you have to look forward to is mounting late charges and interest.
- Taking out a home equity loan to pay off credit card debt: If you own your home and have equity, borrowing against your real estate may seem the quickest and easiest way to get out of credit card debt. You may be able to significantly lower your interest rate, and wipe the credit card slate clean. There’s a significant downside, though: you’re stripping equity from your home and replacing unsecured debt with secured debt. If you fall behind on credit card payments, the creditor may turn you over to collections, or even sue you. If you fall behind on your home equity loan, the creditor may foreclose on your home.
- Jumping into debt settlement: Debt settlement companies often make big representations, promising to slash the balances on your credit card debt and other delinquent debts. But, anyone considering debt settlement should do some serious research. Debt settlement companies typically collect money over time, but don’t negotiate with a creditor until they have accumulated enough to settle the debt. That means those accounts continue to generate fees and interest and negative credit report entries in the process.
- Assume debt consolidation is the answer: Though debt consolidation can lower your interest rate and your monthly payments, it can also be costly in the long run. Often, payments are lowered by extending the life of the obligation. In many cases, that means that even with a lower interest rate, you pay significantly more interest in the long run. When you’re deep enough in debt to be seeking out solutions, you’ll want to think seriously before increasing the amount you’ll ultimately be paying out.
Negotiating directly with your creditors is always an option, and one too few consumers explore. If you’ve attempted to negotiate and can’t reach a resolution, take a deep breath and take time to educate yourself before making a decision about how to proceed. There may be options you haven’t considered. For example, if third-party debt collectors are harassing you, you may have a cause of action against them that may provide leverage to resolve the debt. In some cases, you may even be entitled to monetary damages. Contact Barshay Sanders today to see if we can assist you.