According to Nerd Wallet, an analysis of Federal Reserve statistics and other government data show that the average US household credit card debt is $15,607, counting only those households carrying debt. The average household owes $7,281 on their cards. When looking only at indebted households, the average debt is $15,607.
And sometimes, this debt gets too much for cardholders to handle, leaving many in collections. But you don’t have to let your credit card go into collections just because you are in arrears. The key is to be proactive with the card issuer. Call and explain your situation and make a confirmation date for your next payment and keep it.
“Don’t delay taking action. Even if you’re not behind yet, but see the handwriting on the wall, call your creditor,” says Gail Cunningham, media relations, National Foundation for Credit Counseling.. “Have your financial ducks in a row when you call the issuer. Explain what has happened, that you want to repay your bill, and lay out your plan. This will let them know that you’re serious about repayment and have put thought into how to resolve the problem.”
“The first step is to make a list of what you owe to whom and include interest rate and monthly minimum payment,” explains says Stephanie Genkin, an independent fee-only financial planner in Brooklyn, NY. “This is key because you want to be able to see it all in one place. Understand the total amount of money owed as well as the interest.”
Once you have a handle on what is owed, then organize the list. “Order what you owe starting with the highest interest first,? she says.
?Some people say largest balance on down but I feel there’s no point. You want to stop the bleeding,” says Genkin. “Then commit to paying more than the minimum monthly payment by deciding what you can cut out immediately and throw at the highest interest rate.”
And you don’t need to pay extra on each and every card. “People often make the mistake of trying to add a little extra to each one.
Don’t bother! Pay the minimums (on time) on all but the card with the highest interest rate and attack that one first,” explains Genkin.
You might have to sacrifice something to get your credit card debt down. “Maybe you can give up your gym membership that you seldom use and put that $60 towards the highest interest rate card,” notes Genkin. “Once you set up even a simple plan like this you can start to take a harder look at spending. Where can you cut down? Can you call the bank and bring the interest rate down 5 percent after you show your willingness to pay back the debt more aggressively? Take the time to look a your budget and see where you can trim the fat and add extra money to the most expensive loan every month.”
