Your responsibility to pay off your credit card balance will not change just because there’s a crisis. This is why you should not ignore it. You need to face this problem head-on – regardless if you can pay it back or not. By facing the problem, you can figure out what you can do to solve it.
Throughout the years, credit card debts have always been a cause of stress among Americans. In one survey, it is revealed to cause stress among 23% of the respondents. On top of the pandemic and the financial crisis, these high-interest debts are causing them a certain level of anxiety. Among the other stressors include emergency savings, job security, income fluctuations, and the ability to pay for other things.
Obviously, all of these things are too much to handle all at once. But you have to go through all of these stressors to make sure they all have solutions. Because ignoring the problems will make things worse. At the very least, you should research your options to see how you can arrange payments or secure your finances despite your current situation.
And to start it all off, let’s take a look at what you can do to pay off your credit card balance.
Steps to pay off your credit card balance
The combination of the pandemic, unemployment, and the stagnant economy is pushing people to use their credit cards. People are running out of cash. And they are stocking up on supplies. So to pay for these expenses, they have used their credit cards excessively. Even if they are uncertain about how they will pay it back.
While the behavior is understandable, that does not mean it will not cause you stress. This is why you should try your best to achieve complete debt relief.
But how can you do this considering everything that’s going on right now? Here are the steps that you need to follow.
Review all of your credit card accounts
It’s always a good idea to start by taking a look at the problem. This is why you need to take a look at all the credit accounts that you owe money from. How much do you owe on each one? And what is the interest rate? Knowing the extent of the credit card balance that you have to pay back will give you an idea of how big your problem is. It will be easier for you to find the best solution that will help you pay it off.
This is also a good time for you to check out all your credit card accounts. Analyze if you really need them all. Keep the cards that you use regularly and will give you rewards points so you can get freebies. For the rest, you can close these. If you don’t get rid of the unnecessary cards, you still have to pay annual fees. So if you just remove these cards, you don’t have to waste money on these fees. Not only that, but it will also lessen the temptation to use it. After all, once you run out of cash, it will be very tempting to use the card to pay for what you need. If you have fewer cards, you won’t be in danger of adding a lot of debt to your current credit card balance.
Consider your options to pay it off
The next thing you have to do to deal with your credit card balance is to research your options to pay it off.
Start with your creditors. Visit their website and research existing programs that they have for cardholders that are unable to pay off their balance as usual. They usually have hardship programs that you can apply to. You’re not yet going to apply. You just want to list the options that you have.
After going through the options offered by credit card companies, research debt relief programs. There are several to choose from. You can use debt consolidation loans, credit counseling, debt management, balance transfer cards, and even debt settlement. It’s important to understand how these will affect your finances so you can make the right choice. While all of these are effective, there are usually one or two options that fit your specific financial situation best.
Calculate how much you can afford each month
Once you know your options to pay off debt, the next step is to calculate how much you can afford to pay every month. This will determine the type of debt solution that you can use to pay off what you owe.
Obviously, you need to look at your income and expenses. You may have a six-figure income but if you live an expensive lifestyle, it might be hard for you to pay off your debts. So you have to make sure that you live way below your means so you can use the extra money to pay off your debts.
Of course, not everyone may be getting an income right now. There are millions of Americans who were already laid off from work. If you are one of those, look for other sources of income. You can get a part-time job. Or you can use assets that you have. Maybe you can borrow against the equity of your home and consolidate your credit card balance?
Or you can use your 401(k) plan. While a survey revealed that 53% of respondents have no plans of using money from their retirement account, at least this is an option that you know you have.
You should also research if there are relief packages that you can avail of. Even if these are groceries or food stamps, it can lower your expenses. What you can save can be used to pay for your debts.
Get in touch with your creditors
After going through all 3 steps, you are now ready to talk to your creditors. It’s time to finalize your strategy to pay off your credit card balance. Analyze the debts that you owe, the available options to pay it off, and your capabilities to make monthly payments. Determine how you plan to pay off your debts and discuss this with your creditors.
When you call your creditors, make sure you talk to them in a polite manner. You are going to negotiate with them. You will try to make them agree to a more affordable repayment plan. It’s important for you to be courteous so they will like you enough to help you out.
While you don’t have to bend over backward to make them agree, you just have to be honest and sincere. Tell them that you have a difficult financial situation at the moment. But you still want to pay off what you owe. Work on a new repayment plan that you both agree on. Just make sure that you remain firm with what you can afford. If you cannot pay for it, don’t agree to the plan.
By following these steps you should be able to deal with your credit card problem despite the current crisis.
Tips when paying off your credit card balance during a crisis
Admittedly, it will be hard to pay off your debts because of the crisis. But to be successful, you need to consider these two tips.
Don’t exhaust your cash reserve
Start by not exhausting your cash reserve. While it’s an important task to complete, you also have to consider the other things in your life. You need to manage your debts but you should also work on the other areas of your financial life. You have other things that you need to spend on. So don’t use all your cash to pay off debt. Make sure you find a balance. Pay as much as you can but consider the fact that you have to spend to survive as well.
Plan every purchase – especially credit purchases
Speaking of purchases, you have to plan it. If you have to buy anything, you need to plan it according to your budget. Like if you buy in bulk, you get to save on the cost per piece. Planning will give you time to decide what you will buy. Is it necessary? Is there a better or more economical option? Make sure your purchase is done with a purpose.
Planning purchases is also applicable to your credit transactions. Make sure that if you use credit, you know how to pay it back. That way, it will not make your debt situation worse. It will ensure that your credit card balance will be paid off.