How to get out of credit card debt.
Read a step-by-step for how to get out of credit card debt if you are struggling with your payments or need assistance.
Get your credit card debt forgiven
An increasing number of banks and credit card issuers, such as HSBC and Discover Card, are accepting dimes, if not pennies, on the dollar from consumers as payment in full for their outstanding bills. However, if you are trying to get a credit card debt forgiven, do not expect a sweetheart deal as not everyone is offered this program to get them out of credit card debt.
Almost all lenders will have certain criteria that need to be met. For example, most credit cardholders need to be behind on their payments for at least 90 days and typically your credit report will need to show that you did not have a history of missing payments prior to your recent struggles. Even if you do get your credit card debt settled, there are usually some consequences to this.
In general, closing an account due to a debt settlement program is bad for your overall credit rating and it may very well lower your score for the next several years. In addition, if the forgiven credit card debt is more than $600, you must pay federal income taxes on that amount of debt that was forgiven.
If you need more info, including information on credit card hardship programs offered by HSBC and others, or if you need help negotiating, find additional information on credit card assistance.
Contact your lender for help
If you are one of the millions who has lost your job, or has had your hours cut, or if you are looking at having to pay an expensive medical bill, and if you are worried you won't be able to pay your credit card bill after all this, there are other steps you can take.
You need to open the line of communication, and make sure you call your lender or bank early enough in the process and explain to them your financial situation. It is critical that the sooner you contact them for assistance, the more willing the will be to work with you to provide aid.
Today, more and more credit card companies such as Citibank offer credit card hardship programs and are willing to negotiate your debt and bills with you. While yes, it is true that they're not being charitable, and they are just trying to get what they can out of you, you still can use this to your advantage.
How much help can you ask for? If you can afford to make some kind of monthly payment on your credit card bills, ask your bank or issuer to lower your interest rate and possibly waive any charges or fees on your account. Also you can ask them to work out a payment plan with you. And ask them to forgive your credit card debt. More on credit card hardship programs.
After you call the company, if the first person or customer service rep can’t help you with lowering your interest rate or make any meaningful adjustments to your credit card account, ask to speak with the persons supervisor or someone else. You need to persist as you will find that is needed to find the person who can or will help you with the program you need. As always, be sure to document all conversations, including both the name and title of the person who you spoke with, including the time, date, and results of the conversation.
Prioritize your bills and payments
If you are struggling with paying your monthly credit card bills or debts, it's time to prioritize them. Come up with a budget. First, you need to look at your immediate needs and expenses. You will always need to pay your rent or monthly mortgage, you have to keep making payments to your utility company for energy bills, and of course you have to keep food on your table for your family.
Then next expense you will want to think about paying is your credit card balances. Review all of your credit cards and find out which credit card has the highest interest rate. The card with the highest rate is the one that you want to pay off quickly while continuing to make only modest payments to your other, lower rate credit cards.
Also, be sure to always remember that credit card debt is what is known as unsecured debt. What this means is that there is not much that the credit card issuer can take away from you if you're delinquent on your bills or do not pay it. That being said, you should always strive to pay off your debts, contact your lender for help or debt forgiveness, and basically do everything you can to get out of credit card debt. And probably the best advice is to just stop using your credit cards until you pay off your current bills.