Many Americans have credit card debt. If you’re one of them, you know it’s easy to get locked into what some financial advisors call the credit card debt cycle. We’ll explain what that term means below. More importantly, we’ll talk about how you can break this pattern and feel better about your financial future.
What is the Credit Card Debt Cycle?
When most financial experts talk about the credit card debt cycle, they’re referring to the pattern of continuing to use your credit cards to pay for things when you already have credit card debt. Thus, your debt balance increases and becomes even more difficult to pay off.
The problem with this pattern is that the interest on your credit card debt can accumulate rapidly, to the point where it’s more expensive than the initial charges. The more your balance grows, the more the interest on your balance grows, and the harder it is to make progress on paying off debt.
How To Break The Credit Card Debt Cycle
1. Debt Consolidation Loans
Debt consolidation loans are one way to break the credit card debt cycle. Debt consolidation loans are personal loans that allow you to pay off all your credit card debt at once with a single low-interest loan.
If you’re not certain whether you should get one, look at the options, and then use a debt consolidation calculator to see if the rate for one of these loans is more favorable than what you’re paying on your credit cards. Often, you can get a lower interest rate on a debt consolidation loan, making it worthwhile to pursue one.
Debt consolidation loans can help you get your feet under you from a financial standpoint. When you get one, you only have a single debt to manage every month. You’ll also have a set amount that’s due, making it easier for you to budget.
2. 0% Balance Transfer Credit Cards
Maybe you’ll decide that a debt consolidation loan is not the best option. If not, you may look into getting a new 0% balance transfer credit card instead.
If you get one of these cards, you can transfer the balance from an existing credit card or multiple existing cards to the new one. The 0% interest rate will give you a set amount of time during which you can pay back the money you owe. Most 0% balance transfer credit cards will not remain at that rate forever, but they can provide a window where you aren’t accumulating interest on your debt, which can allow you to make a large dent in it.
3. Nonprofit Credit Counseling Agencies
You might also look into getting professional advice from a nonprofit credit counseling agency if you’re still struggling to break the credit card debt cycle. These agencies are resources that can help you budget and create a debt payoff plan.
You can expect to receive some sound advice to help you develop better spending and saving habits. They can also work with your creditors to establish a debt payoff plan, perhaps affording you a lower interest rate.
Breaking the Credit Card Debt Cycle is Possible
It can be challenging to break the credit card debt cycle, but you can do it if you’re disciplined and determined. You might ask for help from a nonprofit credit counseling agency. They can work with your creditors so you can secure a better debt payoff plan with a more favorable interest rate than you’re currently paying.
Or, you might qualify for a 0% balance transfer credit card. Taking advantage of that debt transfer from a high-interest card to a 0% interest card can give you a chance to get out of debt.
You can also look into a debt consolidation loan. If you can find a credible lending entity that will give you one, you can pay off high-interest debt and simplify your repayment plan.
Once you break the credit card debt cycle by using one of these techniques, or a combination of them, the last step is to avoid the spending habits that locked you into this pattern in the first place.