How to pay off credit card debt due to the pandemic

Credit card usage has increased as the nation continues to emerge from the pandemic.

According to the Federal Reserve Bank of New York, credit card bills increased by $20 billion in the second and third quarters of 2023.

These are some serious coins owed to banks and financial firms.


The good news for those facing overwhelming credit card debt is that there are steps that can reduce debt and eventually eliminate the problem.

Tips to Get Out of the Credit Card Debt Pandemic


Getting out of debt requires commitment and recognition of the problem.  Here are some steps a person can take to get rid of massive credit card debt.

Evaluate your budget

If you spend more than you earn, you have what is called negative cash flow.  Look at your spending and see what expenses are necessary (food, housing, utilities) and what can be cut (new clothes, eating out every day, extra gutters). 

Stick to a budget

There is a reason called "working" to get out of debt.  It requires commitment and perseverance.  Ordering food processors while watching the home shopping network is counterproductive to debt cancellation.  Going through a month in which all meals are cooked at home is a productive step toward getting out of debt.

Stop using cards

This is a logical solution.  If you stop increasing your debt, you should be able to pay it off faster.  The bonus would be if your card company lowers the interest rate it charges while reducing the debt each month.

Talk to a credit counselor

A nonprofit credit counseling agency can connect you with someone who can consolidate your credit card debt at a lower interest rate.  It's called debt management software.  You pay less interest on your credit card debt (goal is 8% or less) and make reasonable monthly payments based on your income.  This step usually pays off the debt in 3-5 years.  This not only gets you out of debt, but it can also improve your credit score.

Nonprofit Debt Settlement

Nonprofit Debt Resolution is a new program offered by select nonprofit credit counseling agencies, including InCharge Debt Solutions.  Lenders agree in advance to lose the remaining balance after 50%-60% of the debt has been paid.  You make fixed payments for 36 months and the debt is canceled.  This can harm your credit score, but you pay less than you owe and the debt is eliminated in 36 months.

Consider the approach to the island

A twisted term for using a credit card system to your advantage.  If you qualify for a 0% balance transfer card, grab it!  Use the introductory period, usually 12-18 months, to pay off your debt at 0% interest.

Pay the most expensive debts first

Called the "avalanche method" this means putting most of your money in the equilibrium direction with the highest interest cost.  When this card is paid off, move on to the next card with the highest balance and pay it off.

Evaluate the situation of your business

Is it possible to increase your income by adding a second job?  This "new money" can be used to pay off credit card debt.

File bankruptcy

This is a last resort because of its impact on your credit and debt score.  But if the debt is overwhelming, and you don't see a way to pay it off in five years, bankruptcy may be the second chance you need to get back on your feet financially.

Minimum

Of all the options, the potential benefits of speaking with a credit counselor cannot be underestimated.  One of the most important things a counselor does is listen to her story and then offer options to solve her problem.  They can help consumers understand credit card debt and how to get rid of it.

An accurate budget can show the consumer that they have more money available each month for debt commitment.  It sounds simple, but some people don't realize this fact until they sit down with a neutral third party who can explain it to them.

Some people are afraid of credit card companies;  They hear the phone ring and are afraid to answer it.  They need someone to make it all stop.

This is what credit counselors do.  They work with card companies to find a win-win solution.  Call one and see if it works for you.