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.

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.

preowned car

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.

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.

cash advance

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.

how to avoid financial stress

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?

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.

debt management plan

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

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.

debt management plan

Ask the Expert: Are Debt Management Plans Legit?

April 12, 2017 | Howard Dvorkin, CPA

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

Howard Dvorkin on debt

It’s Financial Literacy Month. Give Yourself Some Credit! [VIDEO]

April 4, 2017 | Howard Dvorkin, CPA

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

rising interest rates

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.

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?

Business credit cards are for everyone

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.

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?

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.

money or looks

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.

credit card refinancing

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.

Wedding budget of $5,000

Ask The Expert: Declare Bankruptcy Before Or After My Wedding? [video]

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.

negotiate your credit card debt

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?

Wedding budget of $5,000

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.

Millions of Americans Spy on Credit Card Statements of Others

November 17, 2016 | Dori Zinn

Turns out that 24 percent of higher-earning and lower-earning Americans are equally likely to snoop on the credit report of someone they share an account with.

selling your house for a dollar

10 Ways To Stay Motivated When Paying Off Debt

November 17, 2016 | Debt.com

Do you know when to be patient — and when to be angry?

Ryan Lochte Swimming

Dvorkin On Debt: What You Can Learn From Ryan Lochte’s First Credit Card

November 14, 2016 | Howard Dvorkin, CPA

The swimmer, dancer, and Debt.com spokesman just got a credit card. Here’s why that matters.

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The Subtle Psychology of Credit Cards

October 20, 2016 | Dollar Stretcher

Here’s how to understand the emotions of your purchases.

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Americans Have a Ton of Debt

October 10, 2016 | Dori Zinn

Most people say they don’t have any debt, but do they know what debt means?

Check your credit to see where you stand

Never Read Your Credit Card Contract? It Might Cost You

October 4, 2016 | Money Talks News

Only 26 percent of cardholders regularly read them. Find out why that’s a mistake.

get approved for credit cards

Dvorkin On Debt: Credit Cards Are Still Crazy About Fees

September 5, 2016 | Howard Dvorkin, CPA

You’ll never guess how many fees your credit card can charge. Seriously, you’ll never guess.

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Don’t Put College On Your Credit Card

August 24, 2016 | Dori Zinn

Most public schools charge convenience fees that can put you out hundreds of extra dollars a year

how to avoid financial stress

Almost Every State Is Stressed About Debt

August 22, 2016 | Dori Zinn

Most every state in the union is stressed about paying off debt. Here’s the complete breakdown, state-by-state.

Donald Trump by Gage Skidmore

Are Trump and Clinton Supporters Actually That Different?

August 16, 2016 | Dori Zinn

Most supporters of Democrat nominee Hillary Clinton and Republican nominee Donald Trump have credit card debt.

Negotiate with creditors for a low interest rate

Employers Now Use Financial Background in the Hiring Process

July 25, 2016 | Treanna Lawrence

The impact credit scores now have on those seeking out employment

Dvorkin On Debt: Pokemon Go Should Be Pokemon Dough

July 18, 2016 | Howard Dvorkin, CPA

The latest craze in mobile gaming can teach as much as it entertains.

Obamacare is going to cost you one way or another.

Dvorkin On Debt: The Real Definition of “Unhealthy Debt”

July 4, 2016 | Howard Dvorkin, CPA

Debt can not only ruin your life, it can kill you.

By the numbers: millions and billions

FOMO Plays a Huge Role in Millennial Spending

June 21, 2016 | Treanna Lawrence

How the fear of missing out effects this generation

Military Personnel Are Overwhelmed with Their Finances

June 10, 2016 | Treanna Lawrence

Those who dedicated their lives to serving are now left vulnerable to debt

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Ask The Expert: Are Debit Cards Better Than Cash And Credit Cards?

June 1, 2016 | Howard Dvorkin, CPA

A reader’s fiance insists cash isn’t king, and credit cards are evil.

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Dvorkin On Debt: Charlie Sheen Has More Credit Card Debt Than You

May 23, 2016 | Howard Dvorkin, CPA

The (in)famous actor owes nearly $300,000 on his American Express card. I’m offering to help him.

Wedding budget of $5,000

Dvorkin On Debt: 3 Shocking Stats

April 18, 2016 | Howard Dvorkin, CPA

The recession is over, but are we spending our way into another one?

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Dvorkin On Debt: This Week’s Good News And Bad News

March 14, 2016 | Howard Dvorkin, CPA

Are Americans wising up about personal debt? Or are they doubling down?

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Dvorkin on Debt: A One-Two Sucker Punch

February 1, 2016 | Howard Dvorkin, CPA

As we lurch into 2016, personal debt might be a bigger problem than it was in 2015.

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Dvorkin on Debt: Your Holiday Debt Hangover Has Arrived

January 25, 2016 | Howard Dvorkin, CPA

It may not be just a hangover. It might be a disease. Here’s the cure.

debt report good news

Dvorkin On Debt: Blue Monday And Red Tuesday

January 18, 2016 | Howard Dvorkin, CPA

Maybe you’ve heard about Blue Monday. But you didn’t know about Red Tuesday.

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.