How to get rid of credit card debt?
August 4, 2009 4:06 PM   Subscribe

Credit Card debt for teh first time in my life, I'm lost as to what my options are.

I have literally no one I can talk to about this and I feel like doors are being slammed in my face when I'm asking for help.

I just graduated in the spring with an Education degree and had virtually no money at the end of the semester. I had to move back to my city (better job opportunities) and some emergency expenses as well as bills starting to pile up. For the first time in my life I racked up my credit card because of that and struggled to pay it off, I'm at about $5400.00 on my credit card. I'm looking for a teaching job right now and in the meantime working at a golf course and tutoring in the side any spare moment I can get in.

I'm almost at my limit and am freaking out because I am living paycheck to paycheck. I have been not approved for balance card transfers from other companies or lines of credit, all say I have too much debt and don't make enough money right now. My last resort was my bank to do a consolidated loan and they submitted the application and I found out today I've been declined :( Same thing, I make too little money for a loan. They refuse to lower the interest on my CC and basically said I have no options....I have no idea what to do, I've had an account there since I was 7 and this this the first time I've ever had problems with debt.

I cut as much as I can for expenses, I have no cable, no land line, never eat out, walk instead of taking my car (unless I have no choice) etc. I've always been good about paying off my card, just times have been very rough for me right now. I feel like I've dug a hole that keeps getting deeper.

I'm so angry, frustrated and sad, I don't know what to do :( I'm bawling here... Any advice or ideas? (I'm in Canada if that makes a difference)
posted by bluehermit to Work & Money (20 answers total) 4 users marked this as a favorite
 
I apologize for the typos
posted by bluehermit at 4:08 PM on August 4, 2009


Can you make the minimum payment? It's not clear from your question. If you can, I'm not sure what your immediate problem is. You'll have to carry it for awhile until you make more money.
posted by desjardins at 4:10 PM on August 4, 2009


Oh sorry, I can make the minimum payment, but the interest is at 19.5% and the balance will just keep getting bigger, that's what worries me
posted by bluehermit at 4:15 PM on August 4, 2009


Credit Counseling of Canada. They should be able to help you by contacting your creditors and negotiating a lower interest rate, lower monthly payments, or both.
posted by lleachie at 4:17 PM on August 4, 2009


Are you repaying student loans? Is it possible to get a break from those for six months so you can route that money toward the debt?

Do you have anyone who you can borrow money from, maybe just a set amount, so that you can make the monthly payments for the next three months so you stop freaking out?

5400 is no fun but it's not that bad, you can pay it back. You need to scale back living expenses (do you have a roommate? Now's a good time), see where you can get a little breathing room or help, and do not, do not, do not use the credit card anymore.

Every time you have even a tiny amount of money, like three dollars, put it in an envelope. That's your emergency fund. Every time. That's what will buy you gas when you just need to get to work one more day before you get paid, that's what will buy you bread, butter, milk or coffee when you get desperate -- those little things wear on you, and every time you haul the card out for 'just milk' or 'just gas' you'll find it a tiny bit easier to order pizza or beer. You must not do that. It's the little expenses that got you there.

You'll be okay! But calm down first.
posted by A Terrible Llama at 4:21 PM on August 4, 2009


If you've got family with money, explain the situation to them and see if you can work out a contract where they pay the $5400 and you give them, I dunno, 8% interest instead of almost 20. Win-win? I sure as hell couldn't get a reliable 8% return right now, so I'd invest if I knew you.
posted by paanta at 4:27 PM on August 4, 2009


you're going to be ok. This is not a lifelong habit of poor financial planning that's catching up with you, it's a few months of unemployment. Follow A Terrible Llama's advice, and relax a bit :)

So - you can make the minimum payments. I assume this means you can also cover all your other expenses at the moment without putting them on the card? In that case - it's just a matter of time. Keep job hunting. Keep not spending. Keep breathing. When you get a job, don't start spending until you've paid it off.

For more encouragement from a bunch of people who have been or are there, try the forums at Get Rich Slowly.
posted by jacalata at 4:30 PM on August 4, 2009


After 6 months of making your payments on time, you can call and ask to have your interest rate lowered. I've done it twice now.
posted by Green Eyed Monster at 5:00 PM on August 4, 2009


Please contact a anti-hunger non profit in your city. Food stamps and other forms of gov assistance are for everyone who needs them, that includes people with college degrees. Getting such assistance will let you allocate more of your budget to paying off debt without starving to death or being evicted.
posted by melissam at 5:03 PM on August 4, 2009


If you are concerned about negatively impacting your credit, then I would advise against the Credit Counseling services. Yes, they can often negotiate with credit card companies for lower interest rates, reduced balances and payments, but it reflects poorly on credit reports.

If you are able to make the minimum payment right now, then just keep doing that. That minimum payment is supposed to be enough to cover the interest, so unless you're getting charged over-limit and late fees, your balance shouldn't increase. You may be prolonging your debt, yes, but at least you're keeping your credit intact. You will eventually be able to make larger payments and pay it off entirely. Until then, just focus on damage control.

$5400 may seem like a lot, but when it comes to credit card debt, most folks owe a whole lot more than that. You may not believe me, but you're actually in pretty good shape, relatively speaking.

I've been in your shoes, and it does get better. In the meantime, continue being thrifty and money-conscious. Know that you will get through this, and you don't need to feel panicked or backed into a corner.
posted by Todd Forklift at 5:03 PM on August 4, 2009


Step one: make whatever changes you need to make to your life (including moving back home, living in a hostel, whatever) to get your income (if any -- take a fast food job if you have to) and monthly expense (including credit card minimum) to at least break even.

Step two: once you've reached equilibrium, focus on getting a better job that increases your income.

Step three: once you've got the new job, make whatever changes you need to make your life more bearable (move back into an apartment with roommates, unless you like living with your folks or in a hostel) so long as you've got at least one extra dollar at the end of the month, then throw that extra dollar + the minimum at your debt. If you have $2, send that extra, and so on. Soon the debt will be paid off, and you'll be back at zero debt with a little extra money in your pocket. It sounds extreme, but it assumes you don't have any people (parents, etc.) who could loan you money, and it's based on establishing a foundation of at least breaking even every month (so if you can do that and stay in your current living situation, great!)

During this, make sure you ALWAYS pay your CC bill on time to avoid any hikes in the rate.
posted by davejay at 5:22 PM on August 4, 2009


Oh, as suggested above, in step one do not rule out food stamps and other assistance; that's what they're there for. Just make your #1 priority staying alive without using that card again.
posted by davejay at 5:23 PM on August 4, 2009


Sorry, missed this before:

Oh sorry, I can make the minimum payment, but the interest is at 19.5% and the balance will just keep getting bigger, that's what worries me

Revised steps:

Step Zero: stop using the card, period.

The rest stay the same. Since you're already breaking even (at least) every month, it seems, you can skip step two. Just stay diligent and give every extra dollar you have at the end of the month to the CC company. It'll be gone before you know it.

If it makes you feel better, my wife and I paid off $50,000 of debit this way; it took several years, and it felt like forever, but just stay diligent.
posted by davejay at 5:25 PM on August 4, 2009


Thank you so much everyone, you all gave me wonderful advice. I made an appointment with a Credit Counselor, so I think that is the first step to get some help. I feel much better after reading all of your responses. Thanks again!
posted by bluehermit at 5:33 PM on August 4, 2009 [1 favorite]


Also, try to up the income in whatever way you can -- even one shift a week at a coffee shop, or a grocery store, or email all the people you know and mention that you'd love to help around the house with anything (yard work, car washing, cleaning out the attic, etc.) -- will help knock down that total. If you have any extra stuff -- old textbooks, nice clothes, a nice purse -- check out prices on eBay. Good luck - you can do it!
posted by barnone at 5:57 PM on August 4, 2009


Be very alert with a Credit Counselor. Be absolutely sure your fully understand ALL that you are told. If you do not fully comprehend the counselor the you just must question it.
Good luck.

Maybe even google "credit counselors."
posted by JayRwv at 6:55 PM on August 4, 2009


Bluehermit, definitely watch out with the counselors. Many are good, and many help. But that can't be assumed as a given: only a few are nonprofits, and for-profit agencies can sometimes make things more difficult.
posted by WCityMike at 8:09 PM on August 4, 2009


I can make the minimum payment, but the interest is at 19.5% and the balance will just keep getting bigger, that's what worries me

No - the minimum payment will always be more than the interest you are charged each month. So the balance gets smaller.

It'll take about four years to pay off if you make this payment only (assuming it's set at 3% of your balance). An extra dollar paid per day will cut that down to three years. Good luck.
posted by magic curl at 11:33 PM on August 4, 2009


Be very alert with a Credit Counselor. Be absolutely sure your fully understand ALL that you are told. If you do not fully comprehend the counselor the you just must question it.
Good luck.

Maybe even google "credit counselors."


Definitely do this -- some credit counselors are there to help you, some to help the credit card companies. Make sure you know which yours is.
posted by A Terrible Llama at 2:23 AM on August 5, 2009


If you are concerned about negatively impacting your credit, then I would advise against the Credit Counseling services. Yes, they can often negotiate with credit card companies for lower interest rates, reduced balances and payments, but it reflects poorly on credit reports.

This was not really my experience. One or two of the creditors did strike my report with a "credit counseling" line, but it didn't really harm my ability to get credit once the debt was being paid off (at least they know you are trying to pay it down), nor did it harm my long term credit opportunities. I have not one regret about using Credit Counseling (although it was CCCS as I am in the US). The interest rate reduction alone was enough to make it totally worth my while. I had a lot more debt to take care of, too. After just over a year out of CCCS my credit rating is in the mid/high 700s.
posted by getawaysticks at 5:54 AM on August 5, 2009


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