Struggling to Pay Your Credit Card Debt? Here’s What You Can Do

The following is a contributed post by LendingTree and does not reflect advice from Service Credit Union.

Credit cards are a great tool to manage inconsistent cash flow or cover unexpected expenses. If you turned to credit cards to help handle these issues, your increasing balance may be keeping you up at night. As tempting as it may be, do not ignore the problem — doing so could damage your credit score and cause fees to pile up.

Whether your cash crunch is going to be long term or short term, here’s what you can do to ease the burden. 

First, get a clear picture of your current debt obligations.  

When struggling with credit card debt, it’s easy to become overwhelmed. Take some time to make sure you have a clear understanding of how much, and to whom, you owe money. Start by creating a list of all your outstanding debt balances, making note of individual due dates along the way. Then, examine your budget to see if you can afford to make the minimum payments regularly and on time to avoid harming your credit score.  

If your debt obligations feel overwhelming, it’s time to take more drastic steps. 

Talk to your credit card company  

Around 28% of people were not confident that they could pay their credit card bill in November 2023, so you aren’t alone in your struggles to make your payments. In fact, many major credit card companies launched financial assistance programs to help customers dealing with financial stress. 

Contact your credit card company to ask if they offer such a program and/or if they will allow you to defer payment without penalty, offer partial payment, or allow you to adjust the payment. Some organizations may be willing to create repayment plans or other payment modifications. 

Consider debt consolidation 

One way to ease the financial burden of multiple credit card debts is to consolidate all of them into one payment. Doing so means you’re essentially taking on new debt to pay off old balances. It’s important to note that if you’ve already damaged your credit, some of these alternatives may not be helpful and you might want to jump right to working with a counselor (more on this below). Here are some debt consolidation options: 

• A debt consolidation loan: A debt consolidation loan is a type of  personal loan that allows you to combine multiple high-interest debts into a single monthly payment, which may be lower than the APR you’re paying on existing debt. Though bad credit borrowers may not qualify (at least for favorable terms), you will have the benefit of a fixed APR and payments.   

• A home equity loan: Because it’s a form of secured debt, a home equity loan has the potential for low APRs, reducing the amount you pay over time. And while you’ll likely be able to pay off a larger chunk of debt, the risk is high — you could end up going into foreclosure if you fall behind on your payments.  
• A 401(k) loan: You may be able to borrow funds against your 401(k), though you will be subject to fees and potential penalties if you fail to pay it back. If you lose your job or find new employment, you will likely also have to pay back the funds in full within a few months.  

Create a debt management plan with a credit counselor 

Instead of trying to figure out how to consolidate your debt on your own, with a debt management plan, you’ll work with certified credit counselors who will negotiate with your lenders on your behalf. They can help you get lower interest rates, lower payments and potentially have some debt waived altogether.  

Service Credit Union partners with GreenPath Financial Wellness to offer our members free credit counseling and debt counseling, including offering recommendations for how to get out of debt and developing personalized actin plans to meet your goals. 

The U.S. Department of Justice also maintains a searchable list of approved credit counseling agencies to help make sure you’re working with a trustworthy company.  

It’s important to note that debt management and debt settlement are not synonymous. Debt settlement companies typically tell you to become delinquent on your accounts while you set aside payments in an escrow account, which has the potential to hurt your credit score. The industry is also rife with scams, so it’s crucial to do your research before committing to a company.  

Set yourself up for future success  

To improve your overall financial health and prevent a cash crisis from reoccurring, make a plan to increase your savings and pay off debt. The idea can be simple —- reduce monthly expenses and/or increase monthly income — but putting it into action can be harder. To help, you could download this budget worksheet from GreenPath Financial Wellness, use a money management tool, such as the one located inside the Service CU app, or continue to work with a credit counselor.   

Feeling stuck? Do not hesitate to reach out to us for help!