Worried about rising credit card debt? How to manage it

Worried about rising credit card debt? How to manage it
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Coronavirus is creating havoc not only for those who have tested positive, but for others as well. The pandemic is having a far-reaching financial impact on almost every individual. A recent study claims that almost half of America is now carrying a credit card debt. If you are also one of them (or if you are not, and don’t want to be one of them), then there is a way to get out, and that is if you manage or negotiate your credit card debt properly.

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Rising credit card debt due to coronavirus

According to the latest report from CreditCards.com, around 47% of U.S. adults or about 120 million people, are currently under some credit card debt, compared to 43% in early March. This jump in the number of credit card debt holders coincides with the duration of the stay-at-home orders.

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Moreover, the report says that about 23% of credit card holders have increased their debt due to the coronavirus outbreak. Millennials have been hit the hardest with 34% adding to their credit card debt.

Further, the report found that 45% of the cardholders are stressed about their credit card debt, including 15% who are very distressed, while the rest being somewhat stressed.

The CreditCards.com report found that people's most common strategy to pay the debt is paying more than the minimum (60%), paying only the minimum (13%) and balance transfers (13%). Moreover, 9% are not paying at all, while 4% don’t have a plan to pay. Only 7% said they would ask their credit card company for a break.

The coronavirus outbreak has forced more than 30 million people to apply for unemployment benefits over the past few weeks. This, coupled with the fact that millions of younger Americans were earning just enough to support their standard of living, has pushed many to use their credit cards to meet their basic needs.

Talking of the dollar amount, the total consumer credit card debt amounted to $1.057 trillion in March 2019, as per the data from the Federal Reserve. Further, as per Experian, the average credit balance among U.S. adults was at $6,194 in 2019.

How to manage credit card debt

If you are also drowning under credit card debt due to the coronavirus and want to get out of it, discussed below is how to manage it.

The first thing that you should do is to contact your credit card company. This is the best advice that anyone can give you to manage your credit card debt. Considering the present situation, they would be more than likely to listen to your issues. Avoiding them or not talking to them will not help, and in fact, could make matters worse. Card companies will only be willing to help you if you express your willingness to set things right.

Try to explain to them your current situation and ask for the options you have. In fact, the best way to manage your credit card debt is to negotiate your debt amount or other card terms.

Your first objective should be to negotiate the debt amount. If your credit card debt is rising, you may be able to negotiate a settlement on the entire credit card debt you owe. Financial experts say that credit card companies are more likely to negotiate with a cardholder if they are late on their payment rather than if they go into default.

If the card company is not willing to negotiate on the entire amount, then you can negotiate on several other items. The company may allow you to skip a few payments, waive some fees, come up with a new payment schedule, reduce your interest rate or even reduce your minimum payment amount.

Tips to negotiate with the credit card company

There are a few tips that could help you negotiate better with the credit card company.

The first thing is to be honest with the credit card company. You must be clear and direct with the card company. Moreover, you should talk about your credit history and be confident on the amount you can pay back. You need to explain to them your current financial hardships.

The next tip is to be patient. This means you should never jump on the first offer that the card company offers. You should continue to negotiate with an objective to bring down your credit card debt significantly.

Another thing that could help you with the negotiations is to use the competition. One thing that you should know is that no company wants to lose its customer to competitors. Thus, a card company will take every possible step to ensure you stay with them.

You should take advantage of this point by mentioning the offers that the competitor is offering when negotiating with the card company. The idea is to politely threaten the card company that you may switch to another credit card company if your demands are not met.

If you believe you won’t be able to negotiate on your own or your credit card debt has grown too high, then you can take the help of an expert as well. For instance, you can turn to a nonprofit financial counseling organization, such as the National Foundation for Credit Counseling. Such organizations could help you in reaching out to the card company directly.

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