Tips On Tackling Credit Card Debt

Unfortunately, there is no quick fix to get out of credit card debt.  It is important to explore all the pros and cons of the debt consolidation options available and stay clear of quick fix schemes. Below are three ways you may be able to consolidate your debt.  If not, there are certainly options to manage it.

No. 1: Obtain A Secured Personal Loan. Banks, credit unions, and other professional lenders offer this type of loan. However, it requires the backing of some type of physical collateral.  Secured loans are often used to purchase an item of significant value such as a car. Secured personal loan rates can vary substantially.  The rates generally depend on a number of factors such as the value of the asset being used to secure the loan and the credit score of the borrower.

No. 2: Obtain An Unsecured Personal Loan.  This type of loan does not require collateral.  Unsecured personal loans can be found online, and these loans can provide borrowers with fast cash.  However, low interest rates are generally available to borrowers with excellent credit scores.  For borrowers with low credit scores, the interest rates will be higher and the loan can be more difficult to obtain.

No. 3: Home Equity Loan or Home Equity Line of Credit. If you own your home, and you have built up some equity, you may be eligible to take out a Home Equity Loan or Home Equity Line of Credit. The funds would be used to pay off your credit cards and you would be left making just one payment to your lender.  As an additional bonus, the interest from your Home Equity Line or Loan is tax deductible.

If above is not an option, consider some of the below six techniques to manage your debt.

No. 1: Write It Down. Get a visual handle on where you are with your debt.  List on each line the Vendor Name, Balance, Owner, Current Interest Rate, Rate Change Date, Final Interest Rate, Minimum Payment, Monthly Payment and Due Date. You can’t fix it, until you face it.

 No. 2: Wipe Out The Smallest Balances First.  Calculate how much is available each month to pay towards your credit cards.  Pay the smallest credit card balances off first and pay the minimum on the rest of the cards.  Although you may save some money tackling the highest rate cards first, the mental relief that comes with paying off each card far outweighs saving a few dollars!

 No. 3: Consolidate To A 0% Card. Check online to see if any vendors are offering 0% annual fees and 0% transfer fees.  Stay away from cards that offer a 0%APR but still require a transfer fee.  In the end, transfer fees can wipe out the benefit of 0% annual fees.  Right now, Chase is offering the Slate Visa with a 0% transfer fee and 0%APR for 15 months.  This is a great opportunity to pay down that debt!

 No. 4: Resist The Urge To Tap Your Retirement Account. Distributions (taking money outright) from a 401(k) or 403(b) are taxed at ordinary income, plus a 10% penalty if you are under 59 ½. If you borrow the money, and leave your job or get laid off, many plans require you to repay the loan within sixty days or it’s considered a distribution.  Even though these might seem like viable options to free yourself of credit card debt, resist the temptation. Tackle what caused the original credit card debt in the first place, or you could find yourself with new credit card balances and a depleted retirement account!

 No. 5: Keep Only One Low Interest Rate Credit Card For Emergencies. Understand your cash flow; what comes in, what goes out. Understand relatively fixed expense such as gas, food, and utilities versus discretionary such as dining out!  Learn to live within your means.  Using a debit card, allows money to come out of your checking account real time.  When you’ve spent your left over money for the month, that’s it.  Keep one low interest rate credit card in your wallet for emergencies only.

 No. 6: Start An Emergency Fund.  Part of the reason we get into credit card debt is because we don’t save!  Start an automatic transfer each month into a savings account.  An emergency fund holding 6 months worth of expenses may seem daunting, but once you get going, you’ll be surprised how fast it accumulates.  Once that is funded, the rest goes into a separate savings account for all those extras you have patiently waited to buy!

A reputable non-profit credit counseling agency can be found by going to the NFCC, National Foundation for Credit Counseling, at This type of agency can help you create a budget as well as negotiate with creditors on your behalf.

If you need help understanding your cash flow, creating a budget or managing your debt, find a NAPFA Fee-Only Certified Financial Planner (™) professional at

About the author

Kelly Trageser, MBA, CFP®

Kelly Trageser is a CERTIFIED FINANCIAL PLANNER ™ professional and has an MBA in Finance. She is the Principal of Sea Clear Financial Planning, LLC, and independent Fee-Only personal financial planning and investment management firm located in Sea Girt, NJ.

Kelly Trageser has over 20 years of experience in the financial services industry. As a NAPFA-Registered Fee-Only Financial Advisor she has signed a Fiduciary Oath that puts client's interests above all others. NAPFA registered advisors meet the most rigorous continuing education requirements in the industry.

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  • Using credit card is good until we can properly handle it. Credit
    debt actually allows people buy a lot of products that they can hardly afford and should not have had. If we don’t want to deep down in massive credit card debt, we must live within our means, at least in present economic downturn. But if one has already owed so many unsecured debt, he/she may consolidate or settle the debt. Remember, latter can have negative impact on

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