Best advice to someone with $100k in revolving credit card debt?

Question

We have a friend that told us just the other day that her and her husband are drowning in credit card debt. He earns a good living and they are both super cool people. But she said they pay $2500 - $3000 a month in credit card payments and have over $100,000 in balances. I honestly couldn't believe it.

My first suggestion was to consider bankruptcy, but she was 100% against it. I also heard about debt consolidation clinics. But they advise you NOT to pay your debts for months at a time, then negotiate a lower settlement so that the credit card companies can avoid writing you off as a loss. But this ROYALLY screws up your credit as you can imagine!

This situation got me and my wife thinking, as we have our fair share of credit card debt as well. So besides refinancing your house for the 5th time in 5 years, borrowing money from Aunt Edna, or making minimum payments for 60 years, what is the best way to get out of credit card debt???

Answer 1

Stop using the card altogether. Stop buying unnecessary things. Sell everything you don't need. Take proceeds and pay off debt. Budget yourself frugally.

You can also contact the credit card companies directly to negotiate a lower fixed fee. If you are always on time with payments, lenders have a vested interest in keeping you solvent. The more you are able to pay and not declare bankruptcy, the better off they are. My experience with Amex was good on that front since I have had a card for 10+ years and told them I was thinking of transferring balances to a 0% APR promotion, so they lowered the rate for me.

Answer 2

The first step is not to use your credit cards.

Pay the minimum amount for each card and place the extra money if you have it in paying off the credit cards with the highest interest rates.

Some credit card companies send out mailings about so called cheap or free transfer of balances. Look at this very carefully to determine the duration of the free time and charge, if any, for transferring the money. Use with CAUTION since you do not want to just have another card and then run up additional charges for the old cards that now have a new or reduced balance.

Once you pay off the balance of a card do not cancel the card. Tear it up and do not use it since a major factor in you credit score is the calculation of the money that you have available to borrow as compared to the amount actually used.

Save the new credit card offers and then contact your present credit card companies and ask for an interest rate reduction. frequently you will get it. You can even try to get better offers without the new ones at hand on the bases that you are a good customer but threatening to take your business elsewhere is a better bargaining chip.

Under ordinary circumstances the interest rates are so high that for all practical purposes they never will be paid off unless you receive a monetary windfall or a large inheritance.

The solution to the problems that you have and that of your friends is discipline. Follow the steps above and others that appear sensible to you that you may receive from other answers.

Good luck and please let me know how you do.

Answer 3

My first question would be how much money these people earn.

Credit cards are good for emergencies or even every day purchases if you pay the balance at the end of the month. All too often people use credit cards for the wrong concept though. They buy things they do not need with money they do not have.

The first thing I would suggest is making a realistic plan and also a budget. Cut cost anywhere you can. Make a plan to get out of debt in X amount of time, and stop using the credit cards.

If their credit is still in good standing, they could also open up some new cards that would offer 0% introductory rates on balance transfers. They could then cancel any of the cards they transfered the balances off of.

My advice is always to focus on getting a specific debt paid. For example, instead of sending several credit cards slightly more than the minimum payment, focus on paying one credit card off. Pay the minimum payment on the rest of your cards and give everything you can afford to one specific credit card until you get it paid off.

Watching the balance go down on at least one debt will do a lot for morale and make you feel like you are accomplishing something instead of just trying to keep your head above water.

Answer 4

Stop spending. Take away all credit cards, lines of credit etc.

I personally. Make a budget, see where you can cut back. Like firing the cleaning people, eating out, walking to work with gas prices so high. Then put debt in order by highest finance rate. Budget a monthly amount to be paid to your debt. Meet minimum payments on all cards and then pay the highest finance charge off first. Have amounts automatically set up to withdraw from your checking account so there is no last minute folds on paying the full amount. Good Luck.

Answer 5

No, you will not go to jail for credit card debt. Even your massive credit card debt! I know you don't want to claim bankruptcy, but your credit is already trashed at this point. Are you going to be able to pay those hospital bills? If not, I would just lump everything together and talk to a bankruptcy attorney.

Answer 6

First of all if they can afford that much in monthly payments than they can afford to eliminate there debt and still be current with all there bills. It is not rocket science it is very simple actually you do not need to pay someone to do something you can do on your own. You just need to take the time to calculate your bills and what the min. payments are.

Write down all of your credit cards even your mortgage if you want or your car note. Depending how you want to pay them off by largest to smallest or vice versa. Personally I would do it from smallest to largest. Let us say you have 10 credit cards:
#1 balance: $200 (min. payment $15) you send $ 40
#2 balance: $300 (min. payment $20) you send $ 45
#3 balance: $400 (min. payment $25) you send $ 50
#4 balance: $500 (min. payment $30) you send $ 55
#5 balance: $600 (min. payment $35) you send $ 60
#6 balance: $700 (min. payment $40) you send $ 65
#7 balance: $800 (min. payment $45) you send $ 70
#8 balance: $900 (min. payment $50) you send $75
#9 balance: $1000 (min. payment $70) you send $125
#10 balance: $2000 (min. payment $80) you send $150

You have all of your balances written down now send the minimum on all of the credit cards except for the first one so from 2-10 you have $300 dollars left over #1 balance is $200 you pay that one off and you still have $115 left send it to #2 balance it is $300 you send $135 your balance is now $165 the following month you send that off plus the #1 balance min. payment and move to the #3 balance which is $400 here you send them the $15(#1 balance min.)+$20(#2 balance min.)+$300+$25(#3 balance min.)= $360.

You follow this until you pay off your debt and remember the balances that you pay off send that min. payment along with what you are already sending to the next balance that you are paying off. You pay them off quicker like this, and you are already used to living without it so you will not miss it! At the end of this you will have $710 dollars left every month you can continue by then eliminating your mortg. or your car note it is the same concept.

I wasted so much money trying to get myself out of debt paying someone to do something that I could do on my own. I tried these debt consolidation programs and consumer credit people and came out disappointed. I finally sat down with my husband and realized that it would cost us more to get into a program instead of doing it myself.

Answer 7

it seems like a bad situation,
but do whatever is nessicary to wipe out that debt,
if you have savings use that, or any mutual funds,
because your probably paying more intrest in debt than you are in your savings account.,also, if you can afford to,
pay double the minnimum payment as it will save you money,
if you decide to consolidate debt, get a personal loan and pay everything off. this will avoid the credit wrecking problem most consolidation companies will cause.

Answer 8

OMG!

best thing to do is mortgage house and pay off all cards. destroy all cards. house mortgage would be a much lower interest rate, something like 6% as opposed to 18%.

they should consider selling the house and repaying debt. move into a cheaper house.

Answer 9

Umm, with that debt load, they will not be able to get another mortgage right now, anyway.

They need to rip up the credit cards and get to Consumer Credit Counseling. Now. Right now. Their problem is too big to solve with advice that friends got on Yahoo Answers.

Answer 10

quit using them and downsize your life sytle == can not understand why people just don't understand you have to learn to live with your means -- not everyone needs a cell phone or their own car == if a family of four with two teenages would look at what their kids "needs and not wants" be surprised of how much money would be freed up -- out of debt and sleeping good at night!!!