Credit Card Debt Strategies

Consumer credit debt is at an all time high. The want it now pay for it later mentality has caught up with many families. As a result, more and more people are trying to come up with a way to pay back monstrously high credit card balances.

There are 5 common strategies that are used by people to payoff, reduce or eliminate their debt. They are: debt roll up, debt consolidation, debt counseling, debt settlement, and bankruptcy. let’s take a look at each and their pros and cons.

Debt Roll up

This is a great strategy if you can stick to it. The premise is simple. You put together a list of all your debts. Credit cards, auto loans, and mortgage. Starting with the credit card with the smallest balance, you pay the minimum – but with an added twist. you add what is termed an accelerator amount. This amount is extra money you can afford to put towards your debt every month without fail. It is usually recommended that you put down at least 10% of your gross income. So, you pay the minimum plus the accelerator until that card is paid off. Then add that total payment onto the next lowest card balance until it’s paid off, and so on. People that can afford to do this and stick to it typically find that they can pay off all their debt plus their mortgage in about ten years.

Debt Consolidation

This strategy involves taking out a loan with a smaller interest rate to pay off all your credit cards. Usually this loan is in the form of a home equity loan. Good things? Lower interest rate, usually tax deductible. Bad thing? Suddenly you have empty credit cards again. Many people find the temptation just too great, and before they know it, they have a ton of new credit card debt on top of their home equity loan.

Debt Counseling

In this scenario, you hire a third party to collect money from you to pay to your creditors. These counselors can arrange to have your creditors lower your interest rates and get penalty fees removed. Many people that start one of these programs don’t finish. They find the payments too inflexible, and if say a medical problem crops up, they are in financial trouble again. Also, these services are actually funded by the credit card companies.

Debt Settlement

In this strategy, you simply stop paying your payments. Not to avoid paying, but to save that money to pay off in a lump sum. See, once you start getting to 90 days or more late, the credit card companies will offer to settle with you for a reduced balance. There are services that will handle all this for you, but they often charge exorbitant fees to do so. You can do it yourself, but be prepared for a barrage of annoying collection tactics like non-stop phone calls and letters. Your credit score will take a hit, but you can repair it a lot faster than if you declare…


The last resort. Depending on your situation, you may be able to wipe the slate clean. Otherwise, you will still end up paying everything back but will have protection of your assets – such as your house. Your credit score will take a huge hit, and a bankruptcy is on the public record for 10 years. You will find it very difficult if not impossible to borrow any money for things like cars and houses, and if you can find a loan, expect to pay very high interest rates.

Which strategy is right for you? That will vary depending on your circumstances and your resources.