Do you want to eliminate credit card debt legally without paying or hurting your credit? If YES, here are 20 tips & tricks to get rid of Credit card debt fast.
What is a Credit Card?
A credit card is usually a card that is issued to an individual by a financial institution so as to enable them borrow funds that are used at a point of sale. Credit cards are used for short term financing with borrowing limits that are set according to the individual’s credit rating; and interests are always charged by the issuing financial institution one month after a purchase has been made.
Even though credit cards are widely accepted because they can be used in almost every store in the United States, they have a higher interest rate than other forms of consumer lines of credits or loans. When credit cards are correctly used, they can help to dramatically improve one’s financial life.
How is Credit Card Debt Incurred?
Due to the fact that many Americans use this as a form of payment, debts are usually incurred with most people not paying off their debts as they should, thereby harming their credit score. Most people being weighed down by this have started seeking out ways by which they can reduce their credit card debts without hurting the credit card.
It should however be noted that while some people pile up debts through their consuming habits, others incur the debts unexpectedly especially when something huge occurs that they couldn’t have controlled.
Is it Possible to Get Rid of Credit Card Debt Legally Without Paying?
Credit card debts are a very huge financial burden especially when you have a very large amount of debt. The oppression and disturbances from credit card companies and debt collection agencies is better imagined than experienced and even if you draft out a payment plan, it may take months if not years to completely clear out the debt.
Well, what you need to know is that there are ways to either get rid of the debts completely or significantly reduce them without having to pay up. And yes, all the techniques outlined in this article are not illegal.
i. File a Bankruptcy Claim
If you are at your wits end with your credit card debts, you can simply file for bankruptcy. Bankruptcy is a legal process which gives one a chance to start afresh by getting the debts which you are unable to pay forgiven while offering the creditor some measure of payment which may or may not be available.
When you file for bankruptcy, you can easily dispose of your unsecured debts which include credit card debts and medical bills.
Your nonexempt assets like second vehicles, second homes, stocks and bonds, collections with high value and family heirlooms may have to be liquidated to pay off some of the debts, but if you have no valuable nonexempt assets and all you have are exempt properties like a personal vehicle, a personal house where you live, household goods, tools of your trade and personal clothing, these cannot be used to repay unsecured debts so you would be able to walk away without paying.
Summarily, when you file for bankruptcy, you would be able to prevent your creditors from suing you, calling you, sending you all those reminders and letters that make your heart skip several beats or even taking any actions to recover their debts.
But don’t go singing hurray! just yet; filing for bankruptcy has an ugly side which you must know about. For one, it would be noted on your credit report for about 10 years, and because of this, many lenders would refuse to do business with you because you would be seen as ‘high risk’.
Another downside of filing for bankruptcy is that as soon as you file for bankruptcy, most credit card companies would automatically cancel their credit facilities. So if you are filing for bankruptcy because of the debts you owe company A, you can expect to lose your credit facility with company B, C, D and E as well.
Getting a job or a house may also become difficult too because some landlords and employers frown upon candidates with recent bankruptcy filings.
Although filing for bankruptcy gets you off the hook easily and legally allows you walk away from your credit card debts without necessarily having to pay, you should only consider this as a last resort and when you are certain that the ugly side of it would not significantly impact other aspects of your life.
ii. Use the Fair Debt Collection Practices Act [FDCPA] to Your Advantage
The Fair Debt Collection Practices Act [FDCPA] is a Federal law that limits the actions and behavior of debt collectors attempting to collect debts on behalf of another individual or business entity. Under this act, the law restricts the means, time and methods which such collectors can contact you and if the law is violated, you are able to sue the debt collector and the original creditor for damages and attorney fees.
To make this law work for you, what you need to do is to simply stop paying your unsecured credit card debts. As soon as you are contacted by debt collectors, you can dispute or demand documentation of your debt. This is simply a legal strategy to force debt collectors to properly document your debts. You would have to send a demand documentation or dispute letter regarding the debt to the debt collector.
Now, the trick here is that debt collectors get paid on commission and they would rather spend time and energy chasing legally-ignorant consumers who would easily submit to their demands than the legally-difficult ones like you who seem to know how to tackle them.
If the creditor hires a collection attorney, the FDCPA also considers collectors attorneys as debt collectors first so you can also send them your demand documentation letter detailing the documents that they will have to produce before they can initiate a law suit against you.
The documents you would ask for would include an original contract between you and the creditor and detailed accounting for the amount allegedly owed. Most of the time, creditors have difficulty producing these documents and it is also too much work for the creditor and the debt collection agency which is why most of them would simply stop contacting you after you send them the demand documentation letter and you can simply just walk away from the debt.
iii. Consider Debt Consolidation
If filing for bankruptcy seems too extreme a measure for you, you should consider debt consolidation. Debt consolidation simply means bringing all your debts together under ‘one roof’. You can roll your credit card debts into your mortgage loans so that you would only have to deal with mortgage payments and no more credit card debts.
This method is almost like taking out another loan to pay off your credit card loans only that this time, you can negotiate lower interest rates.
iv. Ignore Your Creditors
This method would hurt your credit score but what choice do you have when you cannot afford to pay off your credit card debts? You can simply ignore the calls and mails urging you to make payments on your credit card debts.
The truth is that your creditors only have a limited amount of time to legally file a lawsuit against you. If what you owe is not that much, the creditor may simply let you off the hook because the legal fees and process involved in recovering the debts may simply not be worth it when what you owe is not so much.
v. Negotiate Credit Card Forgiveness
If you don’t want to file for bankruptcy or you have reservations about using the Fair Debt Collection Practices Act, another route to ply is to negotiate credit card forgiveness. Now, this doesn’t completely let you off the debt hook but helps you pay a minimal amount of what you owe so that the rest of the debt would be completely wiped off.
Creditors don’t want to lose their money so if they suspect that you may file for bankruptcy sooner or later, they would be willing to negotiate with you and offer you debt forgiveness so that they can take what they can get while they still can because if you decide to file for bankruptcy, they may end up with nothing.
What you should do is to take a deep look at your credit card debts and the funds available to you and decide how much you are able to pay conveniently. Then call the credit card company and let them know that you are going through financial difficulties and would like to take care of your credit card debts. The company’s representative would look into your details and offer you a settlement amount. Don’t accept this amount, try to offer 30% of that amount and negotiate until you both arrive at an amount that you can conveniently pay.
Make sure you record details of the conversation, the person you are speaking with and get a confirmation number before you send a check to clear the debts. Although this method doesn’t allow you to walk away without paying, you can still get a considerable amount of your debt forgiven so that you would only have very little to pay.
20 More Tips & Tricks to Help Eliminate Credit Card Debt Faster Without Hurting your Credit
1. Ask creditors for lower or special interest rates
Giving your creditor a phone call might be all that is needed to ensure that you get a reduced or special rate but for you to be considered, your credit score rating must be good, which means that it must be at a score of 730 or even higher. Also, another means of consideration is that you must be a long term customer who has been making timely payments.
2. Transfer your balance to another with a lower rate
Transferring your balance means that you can shift some of the debt on your credit card to some of your other cards that have a lower rate. Ensure that you have shopped around for the best transfer deals by knowing what the balance transfer fees are, what annual fees you have to pay and any other strings that may be attached.
3. Focus on one card (laddering
There are very few individuals in the United States that use only one credit card for all their purchases, but most people often have multiple cards and this usually means that they would incur debts on all these cards. Ensure that you focus on clearing the debts you have incurred on the credit card with the highest utilization rate, this process is called laddering. This way your overall credit card debt will start reducing and your credit score will improve. It is important that you do not at any time close your account when it is at a zero balance so that you do not hurt your credit score.
4. Consider borrowing from a peer-to-peer lender
Even though it might seem ridiculous borrowing money to pay off your debts, the catch with these peer-to-peer lending sites is that the loans they offer often comes with interest rates that are fixed and is usually between 20 to 30 percent lower than the rates that are being offered by most credit cards. This therefore allows you to save several hundred of dollars in interest thereby allow you reduce your debt without in any way hurting your credit score.
5. Make at least two minimum payments every month
Due to the fact that interests on credit cards are charged on a daily basis, it is better to ensure that your average daily balance is reduced every day. Even if you are on a tight budget, endeavoring make a minimum payment every two weeks on the card will ensure that your debts is not only eventually reduced but also paid off.
6. Try not to add more debt by making a budget: In order for you not to keep piling up debt that you may eventually not be able to pay off, it is best that you keep yourself from incurring more debts and this means keeping yourself on a strict budget and not making expenses that are not basic or necessary.
7. Make your debt repayment automatic: If you are earning a fixed income, then ensuring that a fixed portion of your income is allocated to paying your debt is a sure way of ensuring that your credit card debt shrinks in a quick way, and it also ensures that you do not hurt your credit score as well.
8. Get help from your friends and family members: Even though this might seem like a weird way to reduce your credit card debt, but any little cash and deeds of kindness that you get from your family members and friends will enable you not to pile up your debt. You can also source for soft loans that you won’t have to pay back with interest from your loved ones.
9. Take freebies whenever you can: If there are stuffs that you can get for free sometimes, take advantage of it and use the free money to pay off some part of your debt. If you keep doing this all the time, then you are bound to settle off your credit card debts as soon as possible.
10. Move to another location: If you have found that the location that you are in is making you spend more than you should, then you should move to another location where your daily expenses are likely to be cheaper. For instance, you can change apartments in order to pay lower rents or share your apartment in order to free up some money.
11. Reuse items: You should make a habit of not buying everything, there are some items that you can buy and re-use. Not only will re-using or recycling ensure that you are keeping the environment safe, but it will also free you the money that would have been used to buy these items, thereby ensuring that you are able to reduce your credit card debt.
12. Create additional streams of income: Even though it might be hard getting a good job and harder getting more than one job, this is one way by which you can shrink your credit card debt. If your day job is very stressful, any additional job or business you take up to make additional stream of income shouldn’t be as stressful, so you don’t experience a burn out.
13. Try to improve on your current income: All employers like employees that are not only competent but that work to help the company to achieve their goals and objectives. Companies are more likely to either increase the salaries of these kinds of employees in order to keep them tied to the company or offer a bonus every now and then.
14. Live frugally: Even though it might seem like we need a whole lot in order to survive, we just need the basics in order to live, and so in trying to clear off your credit card debt, it is best that you trim off the excesses. This might be difficult for a while, the thought that should motivate you is that you are trying to get out of debt.
15. Try to make cash purchases: In order for you not to get into more debts, you should ensure that you pay for your daily expenses with cash sometimes without having to use your credit cards. This is a good way of ensuring that your debt continues to shrink.
16. Know what your debt to income ratio is: This helps keep your debt in perspective and can help you calculate how much you will have to spare when paying your debt, so that it doesn’t keep piling up and keeping you in the red.
17. Pay Lower balances first: This is an alternative form of payment where instead of paying off the highest balances first, you pay off the ones that are the lowest; this way you are able to pay off quicker.
18. Ensure that you enroll in a debt management program: If you feel that having to pay off your debt is a bit overwhelming, then you might need to hire a credit counselor to help you come up with a repayment plan. If you are however running on a tight budget, then there are several software and resources online that can keep you in line.
19. Obtain a personal loan: You can obtain a personal loan from either your bank or credit union and then use this to pay off your smaller loans. It is important that you take an unsecured personal loan instead of a secured one.
20. Sell off unused possessions: In order to have free cash, you can sell stuffs that you know that you can live without. Once you have sold off your possessions, use the money to pay off your credit card debt.
In conclusion, getting rid of your credit card debt might not look so easy but if you are determined enough, you sure can get out without having to hurt your credit score. Being in debt can be constantly worrisome and so if you are willing to make the sacrifices, you are likely to live debt free. Ensure that you go through these tips and tricks and then pick what works for you as you do not need to try all the tricks that are in the article.