The Vicious Cycle of Revolving Credit Card Debt

A Guide to Getting Out of Debt When You Feel Trapped

Debt isn’t fun—by any means. Ask anyone that operates a struggling business. Ask the US government (although sometimes the way they spend money you might think otherwise). Ask a higher education student or anyone still repaying student loans years and years after the fact. You need not look too far - as odds are - you or someone you know is either in debt or very familiar with debt. Unfortunately, our country is sustained and accustomed to living on borrowed money. The United States government has not had a surplus since 2001 and we continue to kick the can down the road. So, understand if you feel trapped by debt, there is always a way out!

Of all the different types of debt out there, credit card and personal loan debt are top of the list of for "bad types of debt". Debt is bad but credit card debt really takes the cake on this one. The only thing worse would be payday loans, cash advance loans and other predatory lines of credit that skirt the lines of what is legal. This is why many consumers turn to us for credit card debt relief.

As anyone who has dealt with the vicious cycle of carrying revolving lines of credit knows, making even a modicum of progress on your debt obligations is—by no means—an easy feat.

At times it can feel like it literally drains the life out of you. The process of actually getting rid of all your debt can become an extremely intensive and overwhelming process.

And for good reason.

Credit cards—by their very nature—are DESIGNED to keep you in debt. They are designed to make your creditors and banks rich and allow them to collect high interest payments for years on end. This is their bread and butter! It's the main profit engine for lending on Main Street and it's a good part of the reason why you get so much junk mail.

Depending on your APR and balances, if you were to only make minimum payments on your cards, your payback and amortization period could range anywhere from 10-25 years. In other words it could take you DECADES to pay down credit card debt if you got yourself into a sizable enough hole. Some consumers really do get "stuck" for that long. On top of all that, if you are still actively charging and using your cards on a regular basis, eliminating that balance could feel next to impossible. It's literally like throwing a bucket of water into the ocean.

Once you become trapped in this vicious cycle, the psychological impact it can have on your daily life can feel devastating and has been known to ruin relationships with friends and family. Financial issues can lead to divorce, deteriorating mental health and can cause a snowball of negativity. This negative feedback loop can become a serious roadblock for many and can lead to a self-perpetuating cycle. This is also a good part of the reason why many Americans often have trouble going to their friends and family for financial help. Sometimes when you are a low point in your life, asking for help isn't always the easiest thing to do. Regardless of whether you have people there to help or not.

For anyone currently feeling “stuck”, please understand that your current situation is only temporary and things will eventually get better. You have options!

If this is something you wish to tackle of your own accord—your foremost priority should be to setup a proper budget! Account for your monthly expenses and do a side by side with your monthly income. Feel free to use our budget calculator to help you get started.

If you don’t have time to put in the work or don’t think it’s something you will be able to tackle on your own, you might be better off reaching out for help.

Debt Relief Companies & Programs

If you are currently one of the Americans that feels trapped in a vicious battle against revolving debt (don’t worry you are not alone), you have options. Often times your best bet may be to seek help by enrolling in a debt relief program.

Although, debt relief companies may sometimes get a bad reputation (due to a few bad apples in the debt relief industry), some organizations like “The Debt Relief Company” actually do the right thing by their customers.

So, exactly how do you decipher between the good debt relief companies and the bad ones?

It’s pretty simple really. First, make sure the debt relief program you are inquiring about does not have any upfront fees or hidden costs. As per the FTC guidelines on settling credit card debt, any legitimate and trust worthy debt relief company will never charge any advanced fees.

Some of the shady actors in the debt consolidation industry chose to disguise themselves as law firms in order to bypass this—since law firms are technically allowed to charge up-front fees—but do not be fooled.

Moreover, make sure to ask great questions and make sure the debt relief firm is not providing you with misguided and unrealistic expectations. Any company that promises to settle your debts for “pennies on the dollar” is usually lying through their teeth and shouldn’t be trusted. If the process was that easy, everyone would do it.

Finally, as with any debt relief or debt settlement option, you should expect to have negative consequences to your credit in the short term.

Good debt relief companies will pave a path for your success in the program early on and set realistic expectations—not mislead them into believing they are receiving a debt consolidation loan or that their program is too good to be true.

Great debt relief companies will have set tactics regarding how to avoid debt collection calls and make your transition into the debt relief program as seamless as possible.

Likewise, even companies that don’t charge up-front fees can be prone to providing subpar services. Some companies will drop clients if they receive a summons/litigation or settle smaller accounts first so that they can charge their fees first (even though it may inevitably lead to a client’s program becoming unsuccessful). The best debt relief programs will charge the lowest percentage of fees, get the best results for their client, have superb customer service and perform all the heavy lifting—so that all you really have to do is kick back and make your monthly payment. The right debt relief services could be the easiest and best path available to you if you are dealing with a significant amount of unsecured debt and don’t really have the confidence to tackle everything on your own. For those of you that are more DIY oriented continue reading below.

Tackling Credit Card Debt on Your Own

Going this route is definitely recommended for individuals that are self-disciplined, have smaller credit card balances, less aggressive creditors, and therefore a lower likelihood of receiving litigation on any one credit card account. Some consumers can also take advantage of balance transfer options but be careful as balance transfers have pitfalls and don't always provide a direct solution. Although, you may not have the years of expertise and financial know-how of a debt consolidation company, negotiating on your own credit card debt is not an insurmountable task—not by any means. Yes, there are definitely more associated risks with going this route since you are essentially shooting a basketball in the dark but if you do your homework—it could work out quite well.

Your first step should be to stop paying your creditors and minimum payments (the debt relief industry refers to this as a strategic default). Stopping your payments will bring your creditors to the negotiating table and show them that you mean business. Since the creditors do not want you to give up on paying them back they will be much more willing to negotiate with you. After this you will want to claim financial hardship and begin the back and forth negotiations with your creditors. Beware this is not an overnight process and will require an extensive amount of work on your behalf. Try to stick firm to your payback terms and get the best possible deal from your creditors as possible. Once you’ve reached an agreement with your creditors make sure to get the terms of settlement in writing and make timely payments on whatever term agreements you reached with them. If you do miss a payment by the set dates it could void the entire agreement setup with them, meaning your payments would be applied to back interest you owe and not towards the debt resolution agreement. For those interested in going this route feel free to research more on dealing with debt as per www.usa.gov guidelines.

Reducing Expenses

Regardless of what option you chose to move forward with, you really should aim to reduce your expenses and put aside monthly savings with both plans. Whether you’re saving a tremendous amount of each month via a debt relief program or increasing your cashflow by going the DIY debt negotiation route—putting money aside for a rainy day is always recommended! Sometimes we experience a change in income or unexpected expenses arise, when this occurs, we can’t continue to live with the same spending habits. We all have to adjust to our circumstances and learn to live within our means.

Increase Your Income

Apart from reducing your monthly expenses, you can also work on increasing your income. Whether, you do so by getting a second job or by generating passive income (definitely easier said than done!) it’s totally up to you. Regardless, sometimes generating some extra cashflow each month may greatly help your financial situation.

Credit cards can be a great tool when used as a vehicle and as a barrier to preventing merchants direct access to your banking information. However, there is a reason lending has been largely frowned upon and disliked throughout the course of history. Usury (as well as Riba) has been forbidden and frowned upon because the system of high interest rates negatively affects society as a whole and the brunt of that cost inevitably ends up falling on the everyday person.

Always try your best to ask questions! Whether you choose to take things into your own hands with a DIY option or go with a trusted company to help is totally up to you. Both options are viable for paving a path towards your future success and financial freedom—it really just depends on you!