Americans have more credit card debt than ever before specially millennials which are really struggling to pay theirs off. Why is this becoming such a pressing issue? Many young people in the United States are drowning in debt from student loans and they used credit cards while in college to pay for textbooks and everyday living expenses. Here are some tips to escape credit card debt.
Realize Why You Got Deep in Debt in the First Place
When you turn 18, you get inundated with credit card offers because you are now a legal adult and can build your credit history. Most teens do not have the income to maintain the minimum monthly payments that they have because they are just starting out financially.
However, the allure of a brand new credit line and a shiny plastic card can make you think that you should go on a shopping spree and treat yourself to a new pair of shoes or other desired items. If you spend more than you make, then you need to cut yourself off from opening new credit lines for at least one year. You should make a spreadsheet of all of your open credit lines and their outstanding balances. This will help you see just how far into the red you are with your personal finances.
Create a Common Sense Approach to Paying Off Your Credit Card Debt
If you know that you struggle to organize your personal finances then you need to find a common-sense approach that will resonate with your personality. Credit card debt relief can be challenging for millennials because you have only been out of your parents’ house for a few years. It can be difficult to have a huge financial burden on you when you are so young and inexperienced with real-world issues.
You can keep track of your daily spending by setting up alerts so that you receive an email or text each time you make a purchase with your credit or debit cards. This can allow you to focus on really honing in on where your credit card debt is incurred so that you can eliminate any of your unnecessary expenses.
Consider Credit Counseling
Credit counseling can be a great resource for millennials. These professionals can speak with you and help you regain your financial stability. These individuals will evaluate your credit card debt load, household budget and credit report to come up with the best solution to give you credit card debt relief as quickly as possible.
Consider Consolidating Your Credit Card Debt
One solution that you should explore is to consolidate credit card debt. Credit card debt consolidation is the process in which you submit an application for a loan so that you can pay off all of your credit card debt. If you are delinquent on your monthly payments then this can allow you to stop being harassed by your creditors with unwanted phone calls and emails.
If you are approved for the loan, then you will receive the funds within 3-5 business days. Afterward, you will just pay the monthly loan payment each month until the outstanding balance is repaid in full. Typically, you will have a lower interest rate than you currently have on your credit cards. This can save you a great deal of money over paying minimum monthly payments on each credit card and incurring a lot of fees. When you consolidate credit card debt, it is crucial to not take out any new credit lines because this can lead you to just compound the problem.
Consider Offering Your Creditors a Credit Card Debt Settlement
If you know that you do not have the funds to repay your debt in full then you may want to consider reaching out to your creditors to offer a credit card debt settlement. If the account is in collections, then you will need to call or email the company that has your account so that you can negotiate on the terms of the settlement. You can pay in a lump sum or in agreed-upon installments. On average, most people will save 30 to 60 percent off the total outstanding balance that is owed.
Millennials often do not have a lot of money in savings. It is important that you try to be strategic about settling the debts that will most help to repair your credit. You can reach out to professionals and seek out services from them; feel free to ask questions so that you can plot your next financial moves and escape credit card debt.
Focus on Setting New Financial Goals for Yourself
You should have financial goals so that you can plan out your finances. Many millennials dream of being rich and spend a lot of time focusing on their career goals and overlook proper financial planning. You should schedule an appointment with an experienced financial planner that can examine your credit card debt and other liabilities so that you can set realistic expectations for the next few years.
Millennials tend to have a lot of credit card debt. They see that others around them carry a heavy debt burden so they do not think that they will suffer down the line. The reality is that the decisions that you make in your twenties and early thirties will impact your credit score for years to come. You need to be able to see credit card debt as a tool only for emergencies. If you use credit cards every day then you could be denied for a mortgage loan or apartment lease. Mortgage lenders and property managers rely heavily on your debt to income ratio to determine eligibility.
Adopt Thrifty Habits in Your Everyday Life
Becoming thriftier can save you a lot of money. You should clip coupons and try to find deals on items that you need to purchase on a weekly or monthly basis. You should make this task fun for yourself so that you have a competitive nature towards saving money. If you focus your attention on paying off your credit card debt then you will slowly see your efforts pay off. You can monitor your progress by signing up for credit score alerts. You can receive weekly updates via email. You can also get recommendations on how to improve your credit score. This is a great financial tool to have in your arsenal.
Do not become defeated if you struggle at first. You should stay motivated and just try your best to make the best financial decisions that you can. You need to stay on track and think about the big picture so that your credit card debt is your main obstacle to overcome.