1. Credit Card Debt: Remember You’re Not Alone

It’s easy to feel helpless–and to see your situation as hopeless–when you’re up to your neck in credit card debt. But for most it doesn’t have to be like that.

The first thing to remember is that you’re not alone. Millions of Americans are in similar situations. Indeed, Fitch Ratings reported Friday that 4.18 percent of all credit cards are at least 60 days overdue, while 5.53 percent are 30 days late. You don’t have to be ashamed. You don’t have to feel helpless. You don’t have to give up hope of regaining control.

2. Time to Stop Being an Ostrich

It’s natural to bury your head in the sand when you’re facing seemingly-insurmountable difficulties. But with that comes a feeling of hopelessness that gnaws at your spirit and creates that knot in your stomach. Steel yourself for a few hours of misery as you open those still-sealed envelopes–from credit card companies and all your other creditors– and compile a list of all you currently owe.

Then write out a budget. List your monthly income and your minimum necessary payouts–rent/mortgage, utilities, food, travel, clothes, and anything else truly unavoidable. Then add in your minimum debt repayments–credit card bills, auto loans, lines of credit, personal loans–everything.

Which of the following tips you follow depends on how bad things are. However, even if the process was painful and the situation looks disastrous, you should now feel better, just for having taken the first step toward regaining control of your life.

3. If You Have Any Discretionary Cash

If you’re lucky, you might be surprised to find that you have–after cutting out luxuries–a few spare dollars a month, which you can use to pay down debt. If that’s the case, there are two golden rules:

1. Stop using your credit cards
2. Prioritize your repayments

Always pay the minimum on every debt, but pay off any small credit card balances and other liabilities first. As you stop having to make minimum payments on those, you should soon find you have more available money each month.

Don’t spend it! Use it to pay more on the remaining balances, starting with those that charge the highest rates. It may take a while, but you should ultimately be able to end up owing nothing to credit card companies–or anyone else.

4. If You’re a Bit Short

If your budget reveals that you’re close to being able to pay all your minimum balances, but can’t quite, then you should phone your credit card companies to negotiate lower payments. There are rules for these calls, too:

• Don’t expect an instant “yes.”
• Be persistent; make repeated calls if necessary.
• Always be polite and remain calm.
• Be honest, but don’t volunteer information that could set off alarms bells. Admitting that you think you may soon be made redundant could be a mistake.

5. If You’re Way Short

Don’t panic if your budget shows your situation is dire. Consult a credit counselor who can help you find the best way forward and, ultimately, achieve that elusive peace of mind.

However, remember that some credit counselors are nothing but ruthless con artists who could take your money in return for zero assistance. The Federal Trade Commission (FTC) advises that you should avoid people who:

• Promise miracles. If their offer sounds too good to be true, it probably is.
• Ask for high upfront or monthly fees or “voluntary contributions.”
• Want your credit card details too early on.
• Offer to enroll you in a debt management plan (DMP) before they’ve studied your situation closely, and taught you budgeting skills.
• Ask you to pay into your DMP before your creditors have agreed it.

6. If You Need to Start Again

If your credit score‘s been shot to pieces and your credit card accounts closed, then secured credit cards may be a way forward. These require a deposit, but they usually report to credit bureaus so they provide a chance for you to restore that credit score.

Three secured credit cards that are well worth exploring are:

• Public Savings Bank Secured Card
• New Millennium Bank Secured Gold Visa® or Mastercard®
• Applied Bank® Secured Visa® Credit Card

Published 06/07/10 (Modified 07/09/14)