Credit card debt

Learn how to manage credit card debt effectively.

Credit cards are an extremely useful financial tool. But the high interest rate credit card debt can that they generate can be problematic for your budget. The more you charge the more you have to pay. The articles below help you understand current trends and economic factors that affect your ability to manage your debt effectively.

Child tangled up in Christmas lights for the holiday roundup

Holiday Bonuses: From Your Work to Your Wallet

December 15, 2017 | Dori Zinn

This roundup is full of financial festivities, failures, and funnies.

Convincing My Boyfriend To Buy Fewer Gifts.

How Can I Convince My Boyfriend To Buy Fewer Gifts This Holiday Season?

December 13, 2017 | Howard Dvorkin, CPA

A reader is upset that her otherwise thrifty boyfriend goes crazy at the end of the year.

Woman Credit Card Charge She Didn’t Make.

How Do I Get Rid Of A Credit Card Charge I Didn’t Make?

November 15, 2017 | Gerri Detweiler

A reader can’t find an answer, but there’s a sure-fire way to get one.

Falls Park in Greenville, South Carolina

Move to South Carolina to Live Within Your Means

November 8, 2017 | Dori Zinn

Low levels of housing debt, credit usage, and loan balances make these Southern cities the best places to live and pocket more of your own cash.

Woman with medical debt and credit card debt sits upset at her laptop

I’ve Never Been In Debt Before, But Now I’m Sick. How Do I Avoid Debt Now?

November 8, 2017 | Howard Dvorkin, CPA

A reader has lived a frugal life, but now her personal health may affect her personal finances.

Don’t Give Up: You Can Bust Out of Self-Imposed Debt Prison

November 7, 2017 | Deb Hipp

Debt doesn’t have to be a life sentence. Here’s how to tunnel your way out.

Skeletons stealing money out of your bank? These real debt horror stories are worse

Money on the Street Interviews: What are Your Debt Horror Stories?

October 27, 2017 | Michelle Bryan

The Witch of Debt hits the street to ask people about their money nightmares and other tales of financial woe.

Baby boomer senior couple enjoying a cup of coffee together

Boomers Aren’t Doing as Bad as Everyone Thinks They Are

October 17, 2017 | Dori Zinn

The most financial unstable baby boomers are doing better than we all thought they were doing, but they still aren’t doing great.

Credit Scores Are on the Rise, But Having One Isn’t Key to Financial Bliss

October 12, 2017 | Michelle Bryan

You can still be in massive credit card debt.

Couple with Money

We Might Win $100,000. What Should We Do With It?

October 11, 2017 | Howard Dvorkin, CPA

A reader is looking at a six-figure windfall, but her husband is about to make an expensive mistake.

Devil burning your cash in credit hell (illustrated)

Are You Living in Credit Hell?

October 9, 2017 | Brandon Ballenger

This spooky map looks at how long it takes to pay off the typical credit card debt in every state.

Credit card theft happens every day

The Older You Are, the Happier Your Credit Card Makes You

October 4, 2017 | Dori Zinn

Customer satisfaction for credit cards is increasing, but when broken down by age, Americans younger than 40 aren’t as happy as their older peers.

This couple is not revealing debt on a first date, which is probably why they're smiling

How Far Should You Go (Revealing Debt) On Your First Date?

September 28, 2017 | Michelle Bryan

It could be vital to compatibility, but best not reveal too much too soon

Too many credit cards can be bad for your credit, even if they are as colorful as these

Are Millennials Opening Too Many Credit Cards?

September 25, 2017 | Ryan Lynch

The generation is looking for cards that offer more rewards

Millennial man hides his face because he has is afraid of credit cards

Millennials Are Afraid of Their Credit Cards

September 22, 2017 | Ryan Lynch

The generation is afraid of debt, creating a vicious cycle of bad spending

Paying off my debt means eating ramen all the time

How Can I Pay Off My Credit Cards Without Eating Ramen Noodles Forever?

September 20, 2017 | Howard Dvorkin, CPA

A reader wants to pay off his credit card debt, but he also wants to eat.

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What Tricks Can I Use To Raise My Credit Score?

September 6, 2017 | Howard Dvorkin, CPA

A reader wants to buy a house, but his credit score is “in the toilet.”

Generation X Logo

Generation X Is Stuck in a Tight Spot

August 23, 2017 | Michelle Bryan

But their growing debt apathy may have payoffs for all

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Lauren Went on a “Spending Freeze” to Pay Off $8,000

August 16, 2017 | Brian Bienkowski

The debt she accrued wasn’t her fault this time, but it was her responsibility.

Woman sits at her laptop by a window wondering are credit cards bad or not

Money on the Street Interviews: Are Credit Cards Bad or Good?

August 9, 2017 | Michelle Bryan

When it comes to credit cards, even good answers have bad elements lying just beneath the surface.

Debt buyers are quietly trading America's past-due debt

Americans Are Buried in Debt, But What About the Rest of the World?

July 31, 2017 | Howard Dvorkin, CPA

Sadly, we’re No. 1 in one of the categories we don’t want to be.

federal funds rate

Will I Make More Money Buying A House Or Paying Off My Credit Cards?

July 5, 2017 | Howard Dvorkin, CPA

A reader and her husband want a new house, but they don’t want old debt, either.

Illustration of a battered man with low income who has become credit invisible

CFPB Wants Credit Card Offers to be More Transparent

June 28, 2017 | Dori Zinn

The Consumer Financial Protection Bureau is asking retail credit card companies to end deferred interest card offers since many consumers don’t actually know what that means.

You can buy a car from a dealership even if you recently declared bankruptcy

Will Bankruptcy Keep Me From Buying A Car?

June 28, 2017 | Howard Dvorkin, CPA

A reader went bankrupt, and now years later, she needs a new set of wheels.

Illustration of man walking towards two paths symbolizing zero percent interest and deffered interest.

Zero Percent vs. Deferred Interest: Do You Know the Difference?

June 26, 2017 | Dori Zinn

The Consumer Financial Protection Bureau wants you to avoid falling into the trap of promotional credit card offers.

What if I stopped paying my credit cards?

Middle Class Millennials Struggle With Employment

June 13, 2017 | Joe Pye

Having a credit score under 700 is related to difficulties holding onto jobs and living on your own.

ATMs are just one method of banking in today's technology-driven world

Don’t Take Advantage of Credit Card Cash Advances

June 8, 2017 | Dori Zinn

Consumers are paying much more in cash advances than what they take out. Here’s a breakdown of the costs.

Close-up of a gold-ingot on top of a troy ounce silver and palladium bar

How Do We Prepare For The Next Recession?

May 31, 2017 | Howard Dvorkin, CPA

A reader agrees with her husband: A recession is coming. They don’t agree on what to do about it.

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High Debt Gives Us High Anxiety

May 19, 2017 | Joe Pye

Most Americans don’t have a plan to deal with an average debt of $37,000.

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Good And Bad News About Recession 2018

May 15, 2017 | Howard Dvorkin, CPA

The economic recovery is literally one step forward, one step back.

Man sitting in home office, reading letter and felling worried. With one hand holding letter and with other hes forehead

Can The United States Help Me Get Out Of Debt When I’m Abroad?

May 10, 2017 | Howard Dvorkin, CPA

A reader has as much debt as income. He’s out of the country. Can he still get out of debt?

Man with his credit card in front of computer takes notes on his financial habits

Ask The Expert: How Do I Hide Debt From My Girlfriend Till We Get Married?

May 3, 2017 | Howard Dvorkin, CPA

A reader is looking for a “hack” to avoid telling his girlfriend the truth.

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3 Steps to Become Debt-Free and Chase Your Dreams

April 28, 2017 | Robert Beiler

A little sacrifice can go just as far as hustle

A couple looks at their finances and struggles to decide if they should pay bills like credit cards or save for retirement

How Do We Save For Retirement And Pay All Our Bills?

April 19, 2017 | Howard Dvorkin, CPA

A reader wants to know how to survive “the sandwich” — without evicting his mother-in-law.

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Ask the Expert: Are Debt Management Plans Legit?

April 12, 2017 | Howard Dvorkin, CPA

A reader wonders if the letters DMP are A-OK.

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April 4, 2017 | Howard Dvorkin, CPA

This month, answers all your questions – in under a minute.

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Interest Rates Are Going Up. Should You Be Worried?

March 30, 2017 | Brandon Ballenger

It depends on whether you have debt, and what kind. If you’re rich, it’s strictly good news.

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Ask the Expert: Jump On The Trump Train?

March 29, 2017 | Howard Dvorkin, CPA

This week: A reader wants to dive into the stock market and clean up. But is he making a mess?

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3 Little But Fascinating Financial Facts

March 27, 2017 | Howard Dvorkin, CPA

Here are some recent news nuggets that, taken together, may make a larger point.

Man with his credit card in front of computer takes notes on his financial habits

3 New Polls that Depress Me about Americans and Money

March 20, 2017 | Howard Dvorkin, CPA

How can the greatest country on Earth not be so great with its money?

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Ask The Expert: What’s The Least Bad Answer?

March 8, 2017 | Howard Dvorkin, CPA

A husband and wife have competing plans for getting out of debt. Alas, both are terrible.

millennials in debt

Millennials Give Scary Answers to Silly Questions About Debt

February 20, 2017 | Howard Dvorkin, CPA

The generation that will soon take over the world has yet to conquer its own financial woes.

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For Love of Money

February 14, 2017 | Joe Pye

Americans prefer financial stability over looks and fitness in romantic partners.

Get lower credit card interest rates!

Credit Card Debt: When “Typical” Is Horrible

February 13, 2017 | Howard Dvorkin, CPA

Here’s a new statistic that should strike fear into your family. Here’s what you can do about it.

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Ask The Expert: Is This The Dumbest Idea You’ve Ever Heard?

February 1, 2017 | Howard Dvorkin, CPA

This week: How Trump, gold bullion, and credit cards don’t mix.

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January 18, 2017 | Howard Dvorkin, CPA

This week: A couple wants a clean slate, but are they mucking up their nuptials?

A mortgage is good debt. Credit cards can be, too, if used properly.

Ask The Expert: How Do I Tell My Fiancee? [video]

January 11, 2017 | Howard Dvorkin, CPA

This week: A man has a dirty little secret he’s keeping from the love of his life.

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We’re Getting Squeezed By Credit Card Debt — But Acting Smarter

December 15, 2016 | Brandon Ballenger

Our expenses keep going up, but our credit card debt is lower than it was a decade ago

Get credit card points that matter to you

Ask The Expert: Are Credit Cards Rigged?

November 30, 2016 | Howard Dvorkin, CPA

A reader is suspicious of all these “reward programs.” How can they possibly be legit?

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Ask The Expert: Should I Sign A Pre-Nup? Or Make Him Sign One, Too?

November 23, 2016 | Howard Dvorkin, CPA

A reader is offended by her fiance, but she’s got an amusing plan to even the odds.

10 Credit Card Debt Facts You Can’t Afford to Miss

#1 Most credit cards have variable interest rates.

This means that when the Federal Reserve decides to raise interest rates, you can expect your rates to increase, too. There are rare fixed-rate credit cards, but they’re hard to come by and only available with excellent credit.

In 2017, the Fed already raised interest rates twice by 0.25% each time. Most credit card companies calculate APR as the prime rate plus a certain percentage. So, while the prime rate increased by 0.5% this year, your APR may increase more.

#2: Minimum payments don’t help you get out of debt.

Credit card companies didn’t design the minimum payment system to be an effective way to get out of debt. In fact, interest charges are how issuers make profit, so they’d probably prefer it if you stay in debt forever. A standard minimum payment calculation takes a percentage of your current balance, such as 2.5%.

At such a low percentage, monthly interest charges eat up roughly 2/3 of every payment you make. Even with a low APR credit card with interest charges around 15%, it eats up half your monthly payment. As a result, you can pay month after month and not make an effective dent in your debt. You have to pay more than the minimum payment to eliminate credit card debt efficiently.

#3:  If you pay your balances in full, you avoid interest charges entirely

Creditors split card users into 3 different groups:

  1. “dormant” users don’t have active accounts
  2. “transactors” are people who pay off their balances in-full every month
  3. “revolvers” carry balances over from month to month

Issuers prefer people who are revolvers because they generate more revenue through interest charges. Transactors avoid interest charges entirely because they pay their balances in-full every month. If a cardholder starts a billing cycle with no balance and then pays off all charges within that billing cycle, no interest charges accrue.

A transactor’s pay-in-full strategy means they reap all the benefits credit cards without the extra cost of interest charges. It’s the best way to use credit as a consumer; even if it doesn’t make the credit card companies happy, it makes your wallet happy.

#4: Annual fees only make sense for highly active credit users

These days, many credit cards are fee-free. However, some new rewards credit cards have annual fees up to $450 or more per year. These credit cards usually offer the biggest rewards and best perks. However, it only makes sense to get a high fee card if the rewards are higher than the fee itself.

Basically, this means high fee credit really only provides a benefit to highly active transactor cardholders. Transactors earn all those great rewards and pay no interest because they always pay the bill in full. In this case, paying a high annual fee is reasonable to get so much back.

#5: Interest charges offset rewards quickly

Earning 5% cash back is great, but even a relatively low APR of 15% offsets that cash back quickly. Let’s say you charge $1,000 and earn 5% cash back; that’s $50 you earn earned. At 15% APR, interest charges equal $12.50 of your $25 payment. If you don’t pay the debt off within the first 4 billing cycles, that $50 gets offset entirely by interest charges.

If you make a purchase that will take a few billing cycles to pay off, use a low APR card. You may want to earn the rewards, but it’s not worth it if you can’t eliminate the debt quickly.

#6: Avoid penalty APR at all costs

If you miss a payment by more than 60 days – i.e. you don’t pay for 2 billing cycles – you incur penalty APR. This rate can be double or more what you pay normally. In fact, penalty APR can be so high that you get trapped in something called “negative amortization.”

Negative amortization happens when accrued monthly interest charges are higher than the minimum required payment. So, you make a payment on time, but your balance goes up instead of down.

You can restore the standard rate for purchases on a card by paying on time for 6 consecutive months.

#7: Don’t use cash advances

Credit cards have a feature that allows you to withdraw money at an ATM. However, unlike your debit card that draws from an account, the funds come from your open credit line. This means you incur interest charges. Cash advance APR tends to be higher than standard APR for purchases. It’s usually over 20% APR and often over 25%.

What’s more, there is no billing cycle delay on interest charges. As soon as you make the cash advance, the creditor applies the cash advance APR. So, it always costs something to use this convenience. If possible, just use the credit card to make the purchase instead of withdrawing cash to cover it.

#8: Know when introductory promotion periods on your cards end

Often when you open a new account the creditor extends special interest rates on purchases and balance transfers. They may offer 0% APR on purchases and transfers for a few months – usually between 6 and 18 months. This is beneficial because it allows you to charge and pay off debt interest-free.

Just be aware that if you have a balance when that promotional period ends, you incur interest charges on the full balance. Ideally, you want to have zero balances when the promotion window closes.

This is especially true if you use a balance transfer credit card to consolidate debt. If you transfer balances from existing cards to a new card with 0% APR on balance transfers, you have time to pay off the debt without worrying about interest charges. But once the standard APR on balance transfers kicks in, you’re back to high interest charges.

#9: Some issuers don’t let you transfer their own balances

If you’re considering balance transfer as a way to consolidate debt, check with your creditors first. Some credit card companies will happily accept transfers from accounts with other companies; however, they won’t transfer a balance from one of their own cards.

Chase® is one of the credit card companies that have this policy. If you have a Sapphire card, you won’t be able to transfer the balance to a Chase balance transfer card. Chase is not the only company that does this. Check with your creditors or review the balance transfer policy before you open one of these accounts.

#10: Credit cards are not good to use for big projects

If you have a major expense, such as a home renovation project, don’t use credit cards to fund it. High interest rates mean higher total cost for your project. A $10,000 project funded with credit at 15% APR results in $9,636.88 in total interest charges on minimum payments. Even if you make $250 fixed payments every month it equals out to $3,949.66 in total interest charges. Your $10,000 project costs almost $14,000 total.

Often a better solution is to take out a personal loan. Loans have lower interest rates than credit cards – usually less than 10%. You still increase your total cost with interest charges, but for much less. For example, let’s say you take out a personal loan for $10,000. With excellent credit, you can qualify for a 6% interest rate in today’s market. The monthly payments would be comparable at $234.55 per month. But the lower rate reduces total interest charges to $1,272.81. Always consider all financing options before you pull out the plastic on a big project.