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Getting free from the credit card trap

Do you remember the first time a credit card company accepted your application? Maybe you were fresh out of high school or had just landed your first full-time job. It may have been exhilarating to go shopping with that new plastic in your wallet, like a kid in a candy store. Maybe you are a little embarrassed at the things you bought then, but the credit card gave you a sense of freedom.

These days, that's probably the farthest thing from the truth. In fact, you may feel that the credit trap has sucked you in, and you aren't sure how you will ever escape. Even if you make those monthly minimum payments faithfully, you still may feel like you aren't getting anywhere.

One method for clearing your credit card debt

Minimum payments for credit cards are typically only a small percentage of the total balance you owe. However, most of that is interest. In fact, your minimum payment may actually include only about 1 percent of the principal you owe.

If you owe thousands in credit card debt, paying off what you owe using only the minimum payments may take you decades and cost you thousands more than the value of what you purchased with that card. If you have multiple credit cards, that's a lot of money spent on nothing.

Financial advisors recommend paying down the debt quickly to avoid overpaying the interest on your credit card balances, for example:

  • Instead of paying the minimum, double that amount on one card until you pay it off.
  • Take the amount you paid toward the first card and add it to the minimum payment on your second card until you pay the full balance on that one.
  • Add the payment for those two cards to the next card, and so on until you have paid off all your credit cards.

You may begin with the card that has the lowest balance, but many advisors suggest you start with the card that carries the highest interest. Of course, this method assumes you have the ability to double your monthly payment, which may be a financial impossibility for you.

Another alternative

A car repair, medical emergency, job loss or unexpected expense can send any budget spiraling, especially if that budget is already teetering with high interest credit card debt. If you have been treading water with your credit card debt, it probably didn't take much before you were in over your head. You may have tried making more than the minimum payments, but that often means using money needed for other expenses.

The real solution to your overwhelming credit card debt may be reorganizing or eliminating it altogether. While bankruptcy may be a scary word to some, you may find the relief you seek through Chapter 7 or Chapter 13 debt relief. To determine if your situation qualifies for one of these options, you can reach out to a California bankruptcy attorney for advice and guidance.

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