Alternative Credit Card Solutions

Credit card debt can be crippling. When confronted with a massive amount of debt, some people might wonder if filing for bankruptcy is the answer. While that may be an option, there are other avenues available to help get out of credit card debt, ranging from getting lower interest rates to setting up emergency savings accounts.

Stop Spending

The first step that needs to be taken is basic. Stop using credit cards. Use cash whenever possible. If you can't afford a purchase, money should be set aside until the item can be bought. When leaving the house, do not bring credit cards. Instead, have some cash to be used in case of emergency. Make sure that the emergency is a genuine emergency and does not entail buying a pair of shoes that are on sale.

Debt Consolidation

Debt consolidation is an option to explore. All the credit card bills are rolled into one bill, which is paid monthly. The benefit to this is that rather than dealing with a dozen or so small bills, a person only deals with one monthly bill. The trade off, however, is that it takes longer to pay off the bills and the interest being charged is relatively high.

Debt Settlement

Debt settlement companies claim that they can have their clients only pay pennies on the dollar when it comes to credit card debt. They are right but there are certain conditions that need to be understood. The client sets up a savings account and puts money into it every month. When enough money (at least half the debt) has been saved, the debt settlement company contacts the credit card company and negotiates a settlement. However, each month, the debt settlement company takes a percentage of the money being put into the account. A disciplined person could also set up a savings account and do exactly what the debt settlement company does. When half or more of the debt is saved, the person can call the credit card company and negotiate a settlement.

Snowball Effect

Another alternative to getting out of credit card debt is the "snowball effect." A person adds up the minimum monthly payment needed for all the credit cards. In addition to that amount, a large sum of money is also set aside. Each month, the minimum balance is paid except for the credit card with the highest interest rate. The extra money is used to pay that bill until it has been cleared. This is repeated with the next highest interest rate card, and so on, until all bills have been paid.

Emergencies

Set up an emergency fund. Put some money in it each week or month. This fund is to be used in case of emergency. It is designed to keep people away from reaching for their credit cards. It is important to remember that the fund is for emergency use only, such as a medical emergency or repairing a car.