Solving Your Credit Card Debt Problem

The average number of credit cards held by American consumers is slightly higher than three, however for those individuals with FICO credit scores above 750, it is not uncommon for the number to go as high as ten. Opening additional credit card accounts and maintaining them responsibly can lead to multiple benefits. These benefits include greater purchasing flexibility, strengthening a credit score and profile, accruing various rewards through loyalty programs, enjoying separate accounts for personal and business expenses, and simply having an extra card available in case of emergency. These all make sense, if you are a disciplined cardholder who already manages your existing accounts responsibly. Therefore, for some people, the answer to the question of “How many credit cards should I have?” leads to the resounding answer of – as few as possible! This unfortunately applies to those at the other end of the spectrum who simply aren’t responsible enough to stay out of trouble with credit cards – individuals who live beyond their means and accumulate onerous levels of high-interest rate debt that eventually causes problems in their lives.

One popular approach to quickly pay off credit card debt is the Avalanche Method, which involves organizing your various credit cards by interest rate, ranking them from highest to lowest. Regardless of the respective balances on the cards, the credit card with the highest interest rate is assigned the highest priority in the repayment process. After making certain to make the minimum monthly payment on each other card, determine the greatest amount that you can pay on the highest interest rate card, and make that payment. Do the same thing the following month, and in each successive month, until the highest priority card is fully paid off. Repeat the process with the second-highest rated card, continuing to make minimum monthly payments on all remaining cards. Each time a card is fully paid off, there will be more money to pay off the fewer, remaining cards. Over time, momentum gets generated, as the avalanche of debt repayment begins to take greater hold. The avalanche method results in paying less interest expense over time while helping you get out from under a mountain of credit card debt more quickly.

Debt consolidation does not close out credit card accounts, but rather, a debt consolidation loan is designed to provide the funds necessary to pay off existing balances on higher-interest rate credit card debt. Paying off the balances saves money on interest expense while simplifying the repayment process, as following a debt consolidation loan, only one streamlined monthly payment becomes required. While existing balances of previous credit card accounts are paid off, those accounts remain open, preserving your total available credit and credit utilization ratio, as well as the average age of your existing accounts, both of which help protect your credit score from damage.

If you carry multiple credit card debt balances spread out among a variety of different creditors, pursuing a credit card consolidation loan can make a lot of sense. Simplifying the number of payments down from a number of different creditors to just one single creditor makes the monthly process of paying credit card bills easier. In addition, you’re also likely to save money in the form of lower interest expense per month, and this can allow you to pay off more of the principal owed, thereby leading you out of debt in less time. Introductory promotional rate credit cards offering balance transfers represent one way to consolidate credit card debt, though these promotional rates often expire within 12-18 months and APRs go much higher after the promotional rate expires. For longer repayment duration of a few years or more, fixed-rate credit card consolidation loans (also commonly referred to as personal installment loans) provide a viable solution.

Following a divorce, each spouse remains responsible for any debt remaining in his or her name. When spouses held a joint credit card, each spouse’s name on the card implies that each spouse is responsible for the debt. This follows “common law” and will hold in 41 of the 50 United States. However, the remaining nine (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) rely on “community law,” which implies that any credit card debt that accrued during the marriage – including credit card debt held in only one spouse’s name – is split between the two spouses after a divorce.