- Adem Selita
How to Take Control Back from Your Credit Card Debt in 2020
Updated: Oct 15, 2020
What Credit Card Companies and Banks Don't Want You To Know
We are constantly being reminded that the economy and stock market is at an all-time high, but not all Americans are entering the new decade with exceptional credit worthiness or stellar finances—not by any means. Many of us are just barely managing to get by each and every day. Regardless of your income and what state you live in, the US has become an expensive place to live. Inflation and the cost of living has far exceeded growth in wages for over a decade now. Being able to live comfortably as an American has become no easy feat. While, a small percentage of Americans are entering the new decade with prosperity in mind, many aren't and those that have been left behind are looking for ways to avoid living paycheck to paycheck and find new ways to get ahead in the new decade.
The first and most important step you can take in order to better your financial standing and better tackle any credit card debt you may have is by budgeting. If you need help with credit card debt, you first should be budgeting, planning, budgeting and then be doing some more budgeting after that. This is the only way to reasonably assess and evaluate your financial strengths and weaknesses. In order to figure out where you stand financially, you must subtract all your monthly liabilities from your monthly take home pay. Whatever is left over is what you have to work with each month (otherwise, known as your monthly disposable income). If you have amazing cashflow and earn a lot of money each month but have too many liabilities and expenses, you can start creating a plan to cut down on costs. Once you have everything mapped out you can begin formulating a plan to put aside any disposable income and use it towards paying your high interest credit cards and unsecured debts (since high interest debt should always be your top priority).
If you simply do not have enough money or disposable income to aggressively pay down the credit card debt on your own, you can look for other viable debt relief options offered by most financial institutions. The most important financial options and debt relief services to help with credit card debt are as follows:
If you need help with credit card debt, you might assume that bankruptcy is an extreme option to take help your financial situation. And you would be absolutely right, but it is still a solution to help with indebtedness nonetheless. In recent years, filing for bankruptcy has become a very difficult feat, it is no longer the easy and fast escape plan it used to be and for good reason—bankruptcy should be left on reserve as a last resort option. Ever since the US federal government passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA), the filing process has become much more strenuous to dissuade many from abusing the option. If you want to claim bankruptcy you really need to understand the ramifications. Firstly, bankruptcy is public knowledge, you will typically have no credit for 10 years and and will essentially be blacklisted for almost all credit opportunities in the near future. Moreover, it's important to understand the difference between a Chapter 7 and Chapter 13 filing. A Chapter 7 will absolve all your debts entirely while a Chapter 13 filing will require a partial payback of the debts forgiven. If you don't actually qualify for a Chapter 7 bankruptcy and wish to proceed with the filing you will have to go the Chapter 13 route (which is usually not the best option). Chapter 13 bankruptcy is very similar to a traditional debt settlement option in that it will restructure your debt obligations to allow for a partial payback of debt owed. So many individuals looking for a feasible debt repayment plan, Chapter 13 tends to be least advised since you will still have many of the negatives associated with doing a bankruptcy with the positives of eliminating your debt scot-free. Either way, you will be put on a strict budget and still be required to pay back a portion of what you owe.
There are a multitude of debt consolidation options in the financial services industry today that can help with credit card debt. Ranging from a debt consolidation loan, debt settlement program, credit card consolidation and debt resolution programs all the way to credit counseling and debt management programs. Debt Consolidation loans can be a great option if you are able to qualify for one with a decent interest rate. However the irony here lies in the fact that most people that qualify for debt consolidation loans are typically individuals that do not need the loan. The catch-22 of credit. However, debt consolidation loans are usually a highly attractive option if you do manage to qualify for one that will save you money on interest payments. You will have one lower monthly payment and should ideally be saving a good amount of money on interest. However, the individuals that need a consolidation loan the most are usually the ones that won't qualify for one. Besides a traditional consolidation loan option, you could also choose to go the route of a debt settlement or debt resolution program. A trusted debt relief company can help eliminate your credit card and personal loan debt by negotiating with creditors to pay back less than what you owe. The good thing about this option is that you are able to forego the detrimental impact of doing a bankruptcy and still save a significant amount from your principal (without paying any interest). It is essentially the middle option in between a consolidation loan and a bankruptcy, so you would have less savings than a bankruptcy but also a lot less negatives.
Debt Relief Programs & Debt Settlement
Debt relief and debt settlement programs have seen a significant resurgence as of late and has been one of the better options in providing individuals with credit card debt help. Although, for a long time the debt relief industry has been synonymous with bad acting companies that only care about corporate profits and provide lackluster results while charging clients up front fees. Due to heavier industry regulation and stricter FTC guidelines, there are some good debt relief companies that actually take of care of their clients and do not charge up-front fees. Debt relief programs are relatively straight-forward in nature and allow clients to pay back less than the full debt amount owed. Moreover, debt settlement is not a loan option and is therefore a 0% interest option. Since customers that enroll in a debt relief program are not utilizing a loan to pay back their credit card debt they do not pay any interest in the program. Debt relief programs utilize an FDIC insured saving accounts to accrue funds that are disbursed to creditors throughout the course of the 2-4 year program. Although, these options tend to have some negative impact to your credit worthiness in the short term they are not permanent like a bankruptcy would be and they still allow you save nearly just as much money. All options have their associated benefits and downsides, however, debt relief programs tend to be viewed as the industry goldilocks zone for debt relief options since they help consumers save a significant amount of money and have some and do not have many negative consequences.
Alternative Revenue Streams
The potential for achieving alternate streams of revenue in today's society is literally limitless! So, if you do not like any of the above debt-relief options you can always try to get a second job or start a business venture on the side. Although, this is usually easier said than done and starting a business will typically require a reasonable amount of investment, it is still a viable option to increase your income. Many extremely successful entrepreneurs have experienced financial hardship and times of extreme uncertainty, so understand this is just one point in your life and everything tends to eventually revert to the mean (meaning if you're down now things won't be that way forever). If you are an extremely hard working individual looking to get your life back on track and take control of your credit card debt this may be the best solution for you. There is no shortage of ways to earn side income nowadays (you could even start writing for a blog!) and many times these side ventures can lead to a complete career change! If you are to be dedicating time and resources to these entrepreneurial ventures, whatever you chose to do, make sure it's something you are extremely passionate about. Otherwise what is the point? There a million different things you could be doing with your time. Life is too short to not make the best of every day and every opportunity handed to us.
Happy New Decade and blessings in the years to come!