How to Take Control of Credit Card Debt

Young lady shopping online with credit card

Living with credit card debt can take its toll on you physically and mentally. It may seem that the balances keep climbing no matter how hard you try.

High-interest rates on credit card balances can form the perfect storm where the monthly interest charges cancel out any payments you make. This cycle can create a debt spiral that feels impossible to escape.

While you may feel defeated, there are financial solutions available. However, not all solutions are the same, and some may cause even more challenges down the road.

Challenges with Credit Card Debt

Credit card debt comes with a bevy of challenges. Because of their convenience, many turn to credit cards first when making purchases – often without considering how they will repay the balance.

Some of the biggest challenges of credit card debt include:

  • Suppose you only make the minimum payment on your credit card. In that case, your payment primarily covers the interest due and any possible fees. Therefore, the principal balance owed declines minimally, and your debt level remains relatively unchanged.
  • When you can afford to make larger monthly payments, expensive interest costs may offset the benefit. If your credit card comes with high-interest rates, the monthly interest charged might cause your balance to go right back up to where it was or become even higher than where you started.

Sometimes it can seem like bankruptcy is the only solution, but that should always be your last resort. The damage to your credit from filing bankruptcy can limit your ability to borrow money in the future for up to 10 years resulting in a tough time receiving loans of any kind.

Finding the Right Solution

Recently, you may have noticed advertisements for apps promising to reduce your credit card debt. Most people don’t realize that these solutions often involve turning your high-interest credit card debt into high-interest personal loans. While this strategy may help pay off the debt sooner, it can still be quite costly.

Instead, consider a debt consolidation loan from the credit union. This solution can help you eliminate high-interest rates, break free from the debt cycle, and save significant money in the long term.

Consolidating Debt with the Credit Union

Debt consolidation can be an effective tool to help you get out of debt. It allows you to move your outstanding credit card balance(s) into a single, easier-to-manage, and lower-rate personal loan.

While you can consolidate debt using a lower-rate credit card, a personal loan offers many benefits:

  • Set Payments: Unlike credit cards that only require a minimum payment, personal loans have set payments. With a fixed monthly payment, more of your money will be going towards your principal balance – reducing how much you owe.
  • Known Payoff Date: Personal loans include a date when the loan will be paid in full. Knowing there is light at the end of the debt tunnel is a great motivator and can alleviate a lot of stress.
  • Lower Interest Rates: Personal loans tend to have lower interest rates than most credit cards. By paying less interest, more of your hard-earned dollars will go towards the principal portion of your debt – lowering your balance quicker.
  • Single Loan: Consolidating multiple cards into one personal loan makes it significantly easier to manage your debt. Instead of juggling multiple payments and due dates monthly, you’ll only have one.

Credit Card vs. Debt Consolidation Loan

If you’re still wondering how you can benefit from a Debt Consolidation Loan, here’s a quick example.

Credit Card Example

Suppose you have a credit card with the following attributes:

  • Balance: $10,000
  • Interest Rate: 16% APR

If you pay $200 per month, it will take you 83 months (6 years 11 months) to repay the entire balance. The total interest paid would be $6,588.

Debt Consolidation Loan Example

Now, let’s say you decide to take advantage of a Debt Consolidation Loan:

  • Balance: $10,000
  • Interest Rate: 10% APR

With a set monthly payment of $322.67, it will take you 36 months (3 years) to repay the balance. That’s a whopping 3 years and 11 months sooner than the credit card option. But that’s not all. You will also pay only $1,616.19 in interest – saving you $4,971.81 versus the credit card option!

We’re Here to Help!

Dealing with credit card debt often feels like an uphill battle. High-interest credit cards offered by banks and retailers can lock you into a debt spiral that is difficult to escape. But don’t worry – we’re here to help.

Our debt consolidation loans will help you break free from this debt trap and put you on a plan to eliminate your credit card debt once and for all. If you’re interested in learning more about debt consolidation loans, our team is ready to help. Get started by applying online, visiting us in-branch, or contacting us to learn more.