The coronavirus pandemic has compounded the stress of credit card debt for many Americans today. Consumers have relied more than ever before on their credit cards to cover bills and necessary purchases due to the financial impact related to job losses and shutdowns. The following methods can prove to be helpful for consumers looking to pay down their credit card debt during the COVID-19 crisis.
Debt Snowball Method
One method of paying down credit card debt which many consumers have had success with is known as the debt snowball method. This method works by focusing all payments on the credit card with the lowest balance first, while making minimum payments on all others. Once that card is paid in full, the consumer then focuses on the one with the next lowest balance, and so on, until all credit cards are paid off in full. By taking the smallest balance first, the consumer is likely to see progress being made paying down his or her debt. Seeing the actual progress can be motivation to keep paying down all remaining credit cards. This method is not a quick fix, however, although it does work successfully over time.
Debt Avalanche Method
The debt avalanche method works similarly to the snowball method. However, this process focuses on the debt with the highest interest rate, first. Normally, these debts tend to be the hardest to pay down over time due to the high interest rates. The consumer takes as much money as he or she can and puts it towards that one card first. Once that card is paid in full, the card with the next highest interest rate is paid next until all are paid off in full. Like the snowball method, the avalanche payment method does take time and dedication for it to be truly successful.
Payment via Personal Loan
Some consumers have had success in paying down their multiple credit cards by consolidating their debt through a personal loan. If a consumer has multiple credit cards with high interest rates, using a personal loan to pay off all these outstanding balances can be one way of successfully consolidating multiple monthly payments into one. Personal loan interest rates tend to be lower than credit card interest rates and having one payment makes the process easier to handle in terms of budgeting.
Balance Transfer Credit Card
Another method of paying down multiple credit cards is to transfer balances to one credit card. Many credit card companies will offer balance transfer cards with a zero percent APR for a set period of time, allowing the consumer to pay down the balance without incurring interest every month. However, it is important that the consumer pay the card down in full before the promotional period expires and not add any other charges to the card. Otherwise, the interest rates could end up being as bad as the ones before, making the process even more difficult.
Credit Counseling and Alternative Methods
Many times, it is a matter of needing help in organizing oneself and analyzing the situation. If a consumer is struggling to pay down his or her credit cards, working with the card issuer can be a good first step. The consumer may qualify for credit card hardship relief, especially if the person is financially struggling as a direct result of the COVID-19 crisis. Additionally, the cardholder may be willing to work with the consumer on reducing the interest rates, waiving fees, or temporarily lowering the minimum monthly payment. It may be worth contacting a non-profit credit counseling bureau, so long as the consumer researches the agency first to ensure it is credible before working with them. A professional may be able to advise how to best handle the situation from an unbiased point of view. If the situation is impossible and the consumer still is not able to continue paying on his or her debts, it may then be advisable to consult a bankruptcy attorney.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.