Whether using credit cards for those “one-click” online purchases, or the ease of swiping your card at your favorite coffee shop, credit cards are convenient tools when managing money. For example, when it comes to travel, credit cards are handy when you want to book a flight, rent a car or stay in a hotel room.
Reward programs make it even more attractive to swipe that credit card. Credit cards with a reward program give borrowers bonus points for categories of spending like restaurants, groceries or gasoline. When certain bonus points are reached, cardholders can redeem them for gift cards, merchandise, travel or other bonuses. With these benefits and many more, it’s easy to see why the majority of people make daily use of their credit cards.
The challenges come into play when it becomes difficult to pay credit card balances in full and on time. Most credit cards charge high-interest rates — as much as 18% or more. With each passing month, it becomes more difficult to pare down those balances as the high-interest rate fees grow along with the balances as additional purchases are made. Below, our partners at GreenPath Financial Wellness breakdown common challenges and solutions when it comes to paying off credit card debt.
Common ChallengesFor the millions of people who owe money on high interest credit cards, the wisest thing is to pay off the balance in full as quickly as possible. But that’s easier said than done, depending on your specific financial picture. Here are some common challenges credit card holders may face:
- Borrowers may start with a low introductory rate, expecting to pay off the balance quickly, but end up paying a much higher interest rate and minimum payment than they anticipated.
- Credit card borrowers may experience a spike in interest when they unexpectedly miss a payment due date.
- People may start with the best of intentions to pay off their credit card balance each month, but over time, the balance slowly increases to a point where the debt feels overwhelming.
The 7 Steps
In order to get control of the situation, here are seven things to keep in mind:
- Know exactly how much credit card debt you owe.
- Track the interest rate of each card and the balance you carry.
- Limit the amount of credit card usage as much as possible.
- For unpaid balances on multiple credit cards, pay down the card that charges the highest rate first.
- If you must use your credit cards, try to use cards with low interest. You can also request a reduction in your interest rate as a hardship option.
- Have a fresh set of eyes review your situation. Talk to a trusted national nonprofit credit counselor, like those at GreenPath, who can contact your creditors with you, and ensure you understand your options.
- Counselors can help focus on your total financial situation and make a personalized plan to address the debt moving forward. Having a clear strategy for handling your credit card debt can help you feel more in control of the situation and reduce stress.
Get Control with a Plan
Wrangling high interest credit card debt can be stressful, but with the suggested steps noted above, it is possible to get in control — especially when you realize you are not alone. GreenPath’s debt management program, available to HUECU members, takes into consideration your total financial picture, from outstanding credit card payments to overall financial health. NFCC-certified financial counselors can help you understand the options that meet your needs.