Applying for a credit card is one of the most efficient ways to build and maintain a healthy credit profile. To apply, you typically fill out an application and provide your name, address, Social Security number, and income. A lender then checks your credit reports to determine if you will likely repay the borrowed money.
How to Navigate Credit Card Debt
If used responsibly, credit cards can unlock worthwhile rewards. But, if not, they can lead to debt before you know it. If you’re in this latter scenario, a few strategies can help you navigate the process of paying off balances to regain control.
Before you start swiping, it’s best to do some research on the cards that interest you and their terms. Compare fees, interest rates, and credit score requirements to find a card that suits your needs. You can do this on the card issuer’s website or by doing some quick online comparison shopping using an independent site that doesn’t require you to give out any personal information. It’s also a good idea to check that the card you choose has a minimum income or credit score requirement that you can meet.
Once you’ve settled on a card, the next step is to submit an application. The quickest way to do this is by applying online, though you can also call or go to a bank branch in person. If you apply online, follow internet security best practices to secure your personal information. This is especially important if you’re filling out an application over a public network or using a mobile data connection that may not have the same level of encryption as your home or office Wi-Fi.
After submitting an application, you should receive an answer within a few days to several weeks. If you’re approved, your new credit card should arrive in the mail soon afterward. If you’re turned down, the card issuer should provide you with a reason and let you know what credit bureau they pulled your report from. Depending on the reason, you might take steps to improve your credit before trying again or consider alternatives to credit cards like secured credit cards or prepaid cards.
One strategy that can help if you’re juggling multiple credit cards with high balances is to consolidate those balances onto one 0% interest card for an introductory period. This can help you save money on interest and make it easier to manage your repayment schedule.
Regardless of how you apply for a credit card, the Credit CARD Act requires the issuer to notify you in writing of the reason for their decision, including which credit bureaus they pulled your report from. If you disagree with the decision, you can ask to speak with a representative and request that the inquiry be reversed or reconsidered. Before you try this, it’s a good idea to clear up any past due or delinquent accounts and decrease your credit utilization ratio (how much of your available credit you use). This could improve your chances of getting a better approval decision.
Strategies for Paying Off Balances and Regaining Control
Credit cards can be a powerful financial tool, but they can also lead to difficult or impossible debt. Fortunately, there are strategies and approaches that can help individuals manage their balances and regain control. These include prioritizing certain credit card accounts, taking on a new loan or credit card to consolidate debt, and seeking professional assistance.
One popular approach to paying down debt is the snowball method. This strategy prioritizes credit card balances by their size and focuses on wiping out small debts first, which can give you a sense of accomplishment early in your repayment journey. Once those debts are paid off, you can roll your extra money toward the next smallest account, allowing you to “snowball” payments and eventually eliminate your credit card debt.
Another option is to negotiate with your credit card company. Many card companies are willing to accept less than the total amount you owe, particularly if they know you are struggling to keep up with your minimum payments. This strategy can save you thousands of dollars in interest and reduce the time it takes to pay off your debt balance.
In addition to prioritizing credit card accounts, you can take on a new loan or credit card to pay off existing ones with higher interest rates. Find a card that offers a long 0% introductory period, then transfer the balances from your old cards to this new account. This strategy can reduce your debt load by lowering the number of outstanding balances and the associated interest rate, and it may be easier to stay on track with your repayment plan because you have just one payment to make each month.
Finally, you can try a middle ground between the snowball and avalanche methods by paying down all your balances simultaneously. This can be an effective strategy if you want to get out of debt quickly and don’t have the patience for either of the other methods.
No matter which approach you choose, remember that the most important factor is making sure to avoid adding to your credit card debt in the future. If you can, it is often best to stick to cash purchases and use your credit cards only for essential expenses or emergencies. Doing this can help you avoid the trap of debt and make it easier to pay off your balances in a timely manner.
How to Get Out of Debt
Credit cards can be useful for building credit, financing purchases, and getting out of debt. They can even help you save money and experience the magic of travel rewards if used responsibly. The key is to make smart choices and stick with your plan. If you’re struggling to get out of debt, seeking financial coaching or consulting a certified credit counselor may be helpful. These experts can provide a variety of services, including helping you set up a budget and creating a debt payoff strategy.
Whether you’re struggling with credit card debt, student loans, or auto loans, there are ways to get out of debt quickly and achieve your financial goals. Start by determining how much you owe, which can be done by gathering your current balances and reviewing your loan agreements and monthly statements. You can access these documents by logging in to your bank or credit card account or contacting the lender directly for copies.
Once you have a clear picture of your total debt, start paying off the most expensive debts first. You can use the snowball method or another technique that works for you. Regardless of the method you choose, be sure to pay more than the minimum monthly payment to reduce your debt faster.
It’s also important to avoid taking on any new debt, as this can lead to additional interest charges and make it more difficult to get out of debt. If you’re struggling to resist the temptation of spending, try hiding your cards or limiting your access to them by leaving them at home when you go out. You can also turn your card into an emergency savings account by adding the card’s payment information to your checking or savings account.
Finally, don’t be afraid to talk with your creditors. Many people hire companies to speak with their lenders on their behalf, but you can do this for free by calling the phone number on your credit card or statement and explaining your situation. Most creditors will work with you to lower your payments to a more manageable amount.
It’s not easy to dig yourself out of a big debt pile, but it is possible with the right tools and dedication. The people profiled in NerdWallet’s How I Ditched Debt series used a variety of strategies, but they all focused on making the most of their money and using extra payments to speed up their debt payoff plans. If you need inspiration, check out their stories and start planning your path to financial freedom.