Top Five Credit Card Debt Relief Strategies for 2009

[Jul 7, 2009.]

 

Recent government statistics show credit card debt delinquencies creeping toward five percent, reaching some of the highest monthly levels since the 1980s. Rising unemployment compounds the problems that many Americans face when trying to reduce debt. Government assistance and societal shifts have made it easier for borrowers to reduce debt using any of these five strategies:

Consolidate Credit Card Debt
Borrowers with access to promotional balance transfer offers may want to act on those special deals before they disappear. Not only have banks scaled back their use of zero-interest, zero-fee debt consolidation deals, many lenders have started trimming unused credit lines. Keeping your credit card debt within credit card accounts poses smallest threat to your credit report, especially if you can already afford to make minimum monthly payments.

Bank-Sponsored Credit Card Debt Relief
For borrowers impacted by job losses or illnesses, a handful of credit card issuers have responded to government pressure by offering limited-time debt relief programs. Known as “hardship programs” or “waiver programs,” these special offers suspend interest payments, late fees, and overlimit fees for customers who can prove the need for special assistance. Some lenders have even offered one-time principal reductions for customers who racked up large amounts of interest over the past few years. Essentially, banks are surrendering some of their profit margin in exchange for a stronger chance at repayment. However, many bank-offered programs require cardholders to surrender their new charge privileges and close their accounts, a sacrifice that can leave a scar on your credit report.

Cut Household Spending to Eliminate Credit Card Debt
According to most personal finance experts, one of the best ways to reduce debt is to reallocate your household budget. Trading off a night at the movies for a Netflix subscription could save a typical family a few hundred dollars every month. Plowing that found money toward reducing principal can cut credit card debt quickly. Even families with more modest lifestyles can find other ways to minimize spending, by eating out less frequently or modifying vacation plans.

Increase Earnings to Reduce Debt
Even with one in ten Americans qualifying for unemployment assistance, most of us can find ways to earn extra income. Taking on a part time job, running errands, or starting a side business are just three of the ways you can bring more cash into your home. Instead of treating extra funds as found money, apply your profits toward credit card debt to get the maximum benefit from your effort.

Broader Credit Consolidation Programs
Thanks to relaxed underwriting rules and new government lending guidelines, more homeowners can qualify to refinance their mortgages as part of credit consolidation plans. Some personal finance experts warn Americans to take this step only as a last resort and only when household earning and spending habits are under control. Otherwise, transferring unsecured credit card debt to a secured mortgage can put you at higher risk of foreclosure.

Eliminating credit card debt isn’t always easy, but it can be highly rewarding. Earning more and spending less might feel like huge sacrifices for many families. Still, with a nation focused on finding ways to reduce debt, now may be the best opportunity ever to find a method that works for you and for your family.

 

About Author:

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.