First, you should limit your charges to what you can pay when the bill arrives by tracking charges and cash flow. Credit cards should finance substantial purchases only if the interest rate is low and the repayment period is short.
However, accumulating debt is tempting and easy because card limits are low when cardholders first receive their card but increase with payments over time. Paying down debt also becomes harder because the balances rise with increased interest compounds and payments.
Your credit score and ability to borrow are casualties of high credit card balances. An account balance should stay under 30 to keep a high score. It is also helpful to keep credit utilization as close to zero as possible.
Timely payments are essential. If a consumer falls behind and misses a billing cycle, creditors will report this delinquency after 60 days to major reporting bureaus. Further missed payments drop scores more.
Negative information remains on reports for seven years. Other repercussions include a court action for a legal judgment where a creditor may garnish wages or seize nonexempt property.
A repayment plan can help deal with this debt. Restrict spending to basic needs to free up money to pay off debt. Next, ask creditors if they will lower credit card interest rates.
Also, sequence payments beginning with the higher interest rates. Charging should stop during repayment.
You may also ask the credit card company to accept less than the minimum payment. If this does not work, try to arrange payment agreements. A credit counselor may also formulate a repayment plan.
Creditors may also agree to settle debt for less than what is owed. But this usually requires a lump sum payment and a consumer must be a few months behind.
For settlement, consumers should act on their own behalf and not use a company that can charge high fees and sometime have questionable reputations. Settlement should be considered as a last resort because it can seriously damage credit and forgiven debt is taxable income.
An attorney can also provide other options, such as bankruptcy, when debt becomes insurmountable. They can help assure that their legal rights are protected.