Credit Card Debt

Credit card debt has become a way of life for a significant percentage of the American population. As of September 2017, 38% of American households carried some variety of credit card debt, with balance-carrying households averaging a credit card debt level exceeding $16,000.

In fact, total revolving debt in the United States now stands at just over one billion dollars! Though initially designed to serve as a convenience to the American consumer, credit cards unfortunately are often misused in a manner that eventually leads many down the road of financial difficulty.

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    Benefits of Credit Card Debt Relief

    Reduce Your Debt

    Shrink your debt and grow your savings with United Debt Settlement. We’re your partners in chipping away at those towering credit card balances.

    Avoid Bankruptcy

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    The Silent Killer of Credit Card Debt

    On a fundamental level, a credit card functions as a personal loan to the consumer that is best paid off in full at the end of each billing cycle. This is where most people go wrong – at the outset. Far too commonly, credit card charges are not quickly paid off in full, resulting in them contributing to an ever-expanding pile of revolving debt that is continually subject to high interest rates ranging from 12-25%, or higher.

    The problem of credit card debt is an insidious one, as it can mushroom almost invisibly to the afflicted. It is not uncommon for a pattern of behavior to emerge that includes somewhat indiscriminate spending habits accompanied by minimum payments made against a growing pile of credit card debt. Yet, life goes on. Bills are paid, necessities remain affordable and provided for, things feel generally under control.

    Slowly but surely, however, a credit card debt problem is evolving. Over time, thousands of dollars in interest expense can go to waste, with revolving debt placing an ever-tightening choke hold on the financial well-being of the debtor. From a credit score impact, the higher the level of debt utilization – that is, the percentage of available credit actually borrowed – the greater the negative impact on a credit score.

    Stack of credit cards - combining credit card debt with mortgage

    How Debit Cards Differ from Credit Cards

    When a consumer uses a credit card, they’re borrowing money to make a purchase. However, when someone uses a debit card, they’re really just spending money that already resides in a bank account. From a debt accumulation and interest expense standpoint, debit cards are obviously better than credit cards.

    With a debit card, money for expenditures is deducted from the associated bank account with the issuing bank sometimes charging a transaction fee. In the event a bank account gets depleted to zero, any subsequent debit card charges will be declined until the bank account is replenished.

    Credit cards accumulate balances and carry over revolving debt from previous billing cycles that lead to monthly bills with due dates and minimum required payments. When a credit card balance reaches its designated credit limit, any attempted purchases will be declined, but the monthly bills will keep on coming.

    There are some advantages that credit cards possess over debit cards related to security and rewards programs. If your credit card is suddenly used without your authorization, you will not be held responsible, provided you report the situation to your bank. With debit cards, security can be more of an issue – as a would-be thief can potentially drain all of the money from your bank account.

    If you become the victim of debit card fraud, you will have to dispute any unauthorized debits and your bank account funds can be restricted for the amount in question while it takes to resolve the dispute.

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    Credit Card Debt

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    Too Much Credit Card Debt

    Issues start to surface when a borrower becomes overly casual with their credit lines, using credit cards for luxury purchases and other expenses that push them to live beyond their financial means.

    Credit Card Interest Rates

    Credit card interest rates are classified into three types: variable, fixed, and promotional. Proceed with the following actions to reduce your credit card interest rates effectively.

    Credit Card Debt FAQ

    You may want to consider applying for a secured VISA credit card, one in which you deposit money into a savings account and the card is then used for purchases up to the amount of your deposit. This is an excellent way to begin the process of rebuilding your credit.

    A credit card account from fifteen years ago is displayed on my credit report. Are accounts supposed to stay on my credit report for this long?

    If you look closely at your credit report, you’ll likely find that credit card account activity from more than ten years ago actually reflects a positive item – namely that you paid your bills on time. Negative items – such as missed payments and late fees – will remain for seven years, while bankruptcies and judgments remain for ten years. If you discover negative items on your credit report that extend beyond these time frames, contact the credit reporting agency that issued the report and dispute the error.

    Credit Counseling is a wise option for those who need help getting back on track financially. A skilled, certified credit counselor from a reputable agency will conduct an initial 30-45 minute telephone interview related to your income, expenses and debt levels, before making a determination as to what may be the best solution for your specific financial situation. Common solutions including enrolling in a debt management plan, taking out a debt consolidation loan or pursuing debt settlement.
    If you and your former spouse opened any joint credit card accounts or other credit lines – including mortgages and auto loans – then you’ve got to stay on top of these situations. Contact each creditor to determine whether you can convert joint accounts into individual accounts, and make every effort possible to remove your former spouse as an authorized user from any credit card accounts that bear your name.
    There isn’t a number to assign to the answer of this question – but rather it is a matter of how you are managing your debt level, the amounts you are paying off each month, and whether you have been using credit cards for extravagances and unnecessary experiences that are truly beyond your means. If you’re paying only the minimum monthly payments, that’s a sign that you’ve got too much credit card debt and insufficient amounts of disposable cash to pay off what is often high interest rate (12-20% or higher) credit card debt. If you’re using one card to pay off another card (exclusive of low-interest rate balance transfer promotions), that’s another sign that you’ve got too much credit card debt. If you’re buying things on credit that you cannot afford to purchase for cash, that’s another sign that you’ve got a bad credit card spending habit in place and have too much credit card debt. Other signs that you have too much credit card debt include when you are denied additional credit when you apply, and when your card(s) “don’t work” at the point of purchase – because the credit lines associated with them are already close to “maxed out.”
    Unpaid or delinquent credit card debt will fall off a credit report after seven years – but this does not extinguish the debt liability itself. Only the debtor’s particular state statute of limitations as it pertains to credit card debt can restrict the creditor (or collection agency) from pursuing debt collection after a sufficient period of time elapses. However, statute of limitations on credit card debt collection will vary considerably from state to state, the seven year mark is only relevant when it comes to unpaid debt no longer appearing on a credit report. State statutes of limitations related to credit card debt collection are often shorter than seven years (they typically range from three to six years), but are occasionally as long as ten years.
    Consolidating credit card debt without hurting a credit score is a relatively straightforward process. A debt consolidation loan, such as a personal installment loan – or even a promotional low-interest rate credit card balance transfer – consolidates multiple debts into one single loan, typically resulting in a lower interest rate and monthly payment. Debt consolidation loans streamline the repayment process while simultaneously lowering interest expense and the total amount repaid over time.
    Negative consequences result almost immediately following a missed credit card payment. Late fees, an increase in the required minimum monthly payment, followed by penalty APR after 60 days of missed payments – your interest rate can quickly go as high as 29.9%! Interest expense mounts, things get expensive in a hurry, and your credit card billing department will contact you with increasing frequency via phone, text and email. Your credit score gets impacted negatively as the three major credit bureaus (Experian, Equifax and TransUnion) are notified of your delinquency at the 30, 60, 90, 120 and 180-day hallmarks. After 180 days, your credit card issuer will charge-off your account (write it off as a loss) and sell it to a collections agency, who will begin their own steady pursuit of you and the debt. Meantime, since your debt is now over 180 days delinquent, your credit report will bear the stain for seven years, holding back your credit score further.

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