How much credit card debt is too much? 4 legit ways to get rid of credit card debt

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Answer: Ideally, you should not have credit card debt because you shouldn’t carry a balance from month to month.

Stop stressing about juggling multiple credit card payments you can't afford and a low credit score. Use these tools to consolidate credit card balances and be debt-free.

This is a complicated subject, so I’ve put together a comprehensive list of what you need to know about getting out of credit card debt, and moving on to building financial security and wealth.

How to get rid of credit card debt:

  1. Debt consolidation
  2. Debt management
  3. Debt settlement
  4. Bankruptcy

1. Debt consolidation for credit card debt

Credit card debt is unsecured debt. You didn’t have to put down any collateral to borrow the card issuer’s money. That’s why the interest rate is so high: You don’t really have any skin in the game.

Trouble is, a little bit of credit card debt can get out of hand really fast. Say you have a $10,000 balance on a 15% interest credit card, and normally pay $200 a month against it. By the time the debt is finished, you will have paid out a budget-busting $5,132 in interest. That’s more than half of the original balance, which is just insane.

What does ‘consolidate debt’ mean?

Just what it sounds like: Putting all your debts in one place and paying them off, either with a credit card debt consolidation loan or through a 0% balance transfer credit card. Either of these options can save you some serious bucks.

However, most balance transfer deals are good only for 12 to 21 months. If you haven’t paid off the balance by then, you’ll go right back to paying interest – and that interest could be as high as 25% or more, depending on your creditworthiness.

But with a personal loan, you could have as many as five years to pay what you owe. For people who can’t swing total repayment in 12 to 21 months, the five-year plan could be a real lifesaver.

Embarrassed by the idea of asking for a loan at your local bank or credit union? You don’t have to! Online lending makes the process fairly simple – and completely anonymous.

Consolidate debt pros and cons


The cards that are eating you alive with high interest charges will be replaced by a lower (maybe much lower) interest rate.

That interest rate is set for the entire term of the loan.

You’ll make one payment a month instead of several, so there’s less chance of missing a card payment (and getting hit with a late fee).


With credit cards, you have the (unhealthy) option of minimum payments during months you’re overextended. With a loan, you have to make the entire payment – no exceptions, no excuses.

The full loan payment is due even if you get sick or lose your job, whereas with a credit card you could temporarily switch to minimum monthly payments.

If you don’t address the issues behind your debt – a shopping addiction, say, or too-high housing costs – you’ll end up in money trouble again once this loan is paid off.

2. Debt management for credit card debt

A credit card debt consolidation loan or 0% balance transfer aren’t the only ways to pay what you owe. Those who aren’t eligible for a loan or credit card – or who simply don’t want either one – can also opt for debt management, debt settlement or bankruptcy.

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Whether you use a for-profit debt management company or a nonprofit credit counseling agency, the result is the same: You repay what you owe.

That means a smaller hit to your credit score than either debt settlement or bankruptcy. However, if the credit counselor thinks either of those is warranted, they’ll say so.

If you go with debt management, the counselor will work with your creditors to see if you can get a lower monthly payment and/or lower interest rates. The counselor might even be able to get rid of late fees.

All your credit card balances are pooled into one monthly payment, which the counselor makes for you. You’ll also need to pony up a monthly fee (typically $20 to $30) and probably an initial enrollment fee.

In addition, you must agree to: 

  • Stop using credit during repayment (some card issuers close the account anyway)
  • Not take on any new credit – if you do, the creditors could decide to quit playing nice
  • Never miss a payment – again, the creditors might quit working with you

Look for a company that has accreditation from the National Foundation for Credit Counseling. Most provide help at low or no cost.

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Debt management pros and cons


Clear, actionable plan for debt repayment

A single monthly payment, at potentially lower interest rates

Potential end to collection agent phone calls and/or legal action

Counselors help you figure out how to prevent future debt


Credit use isn’t allowed during repayment 

To deal with unexpected expenses you’ll need to build an emergency fund – which could be tough if you’re already having money issues

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3. Debt settlement for credit card debt

Ideally, you’d be able to pay what you owe. Sometimes it isn’t possible, however, especially if you’re having trouble paying for basic expenses. For some, debt settlement is the way to go.

With debt settlement, the creditor will take a smaller amount than you actually owe them. This can take a long time (up to four years!) and can wind up costing you big money anyway, for two reasons:

  • Fees from debt settlement companies
  • You might owe taxes on some written-off debt

Basically, this is a last resort. Creditors who realize you probably can’t ever pay in full might agree to get something rather than nothing. A debt settlement company will tell you to stop paying altogether, and put that money in the bank. Eventually it will hammer out a deal with your creditors.

Until then, the fact that you’ve quit paying means two more bad things:

  • Late fees and interest will balloon your credit card balances
  • Your credit will be trashed

Any debt the creditors charge off will stay on your credit report for seven years, along with all your non-payment info. Worse, there’s no guarantee your creditors will want to play along; in fact, some creditors outright refuse to work with debt settlement companies.

A debt settlement company can’t ask for money upfront, but once your case is concluded you’ll owe fees. Typically that’s a percentage of the eliminated debt.

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Here’s one example:

Jess owes $10,000 total; the debt settlement company gets her creditors to agree to settle for $5,000. Jane now has to come up with five grand in cash plus $1,250 to the debt settlement company – and since the IRS typically considers forgiven debt to be income, she might also owe taxes!

Since her credit is now trashed, Jess probably won’t be able to get a decent deal on a car loan or mortgage for the foreseeable future. Any credit cards she’ll qualify for will likely have low limits and high fees. And since some potential landlords and employers want to have a look at credit reports, Jane will be in the doghouse there, too.

No wonder the National Consumer Law Center noted that debt settlement companies “often do more harm than good and turn out to be a waste of money.”

Debt settlement pros and cons


  • The debt is finally cleared
  • No more calls or letters from creditors
  • You no longer have to fear lawsuits


  • Your credit will be trashed
  • You might owe taxes on forgiven debt
  • High fees
  • No guaranteed results

4. Bankruptcy for credit card debt

Filing bankruptcy for credit card debt is pretty extreme. But it might be the right thing to do if there’s no way to pay your debt within five years, or if your total debt (not counting mortgage) is more than 40% of your income.

Get expert advice before deciding to file for bankruptcy. You may have options you hadn’t considered. Talk with an NFCC-affiliated counselor and/or a bankruptcy attorney (some will give free consultations).

Consumers have two options:

Chapter 7 bankruptcy

The most common form, Chapter 7 allows for forgiveness of most unsecured obligations, including medical bills, personal loans and credit card debts. (It won’t zero out child support, recent taxes or student loans, however.)

In order to qualify, you have to pass a “means test.” The test judges your income and expenses to see if you truly can’t afford to repay your debt.

Chapter 13 bankruptcy

This one doesn’t forgive your debt, but it does give you up to five years to pay them off. In order to file, you must be current on your taxes and have a regular source of income (it’s sometimes called “the wage earner’s bankruptcy”).

Chapter 13 is designed for people who make too much to qualify for Chapter 7, or who have certain assets they want to keep and/or secured debts (such as a mortgage) that they want to keep paying.

Bankruptcy pros and cons


Your consumer debt may disappear

If you file Chapter 13 bankruptcy, you can hang on to some of your property

No more collection calls or lawsuits

You’ll be able to save for retirement instead of throwing every dime at an ultimately lost cause


Major blow to your credit score

It can stay on your credit report for up to 10 years

Psychological impact of being bankrupt — it can feel devastating to have to file for bankruptcy

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Credit card debt consolidation options

Want to deal with debt on your own? Here are your credit card debt consolidation possibilities.

First, start with a side-by-side comparisons of the best 0% balance transfer cards.

Balance transfer credit cards

How does 0% interest sound to you? A balance transfer credit card lets you move your higher-interest debt to a card with no interest during a promotional period.

If you can qualify for a balance transfer credit card, all the interest you would otherwise have been paying can go toward paying off your debt. And you do want to get that balance paid off: Once the promo period ends, your new card’s usual interest rate will kick in. So throw all that “extra” money toward the debt and zero it out as soon as you can.

Don’t just apply for the first balance transfer credit card offer you see online. Instead, visit a site like to look at side-by-side comparisons of the best 0% balance transfer cards out there. You’ll be able to read card reviews written by credit experts, and find the card that’s right for you.

A balance transfer fee of 3% to 5% is part of the deal; the fee combined with promo period length determines your monthly payment. For example, suppose you have a $5,000 debt and transfer it to a card with a 5% fee and a 21-month promo period. The debt is now $5,250, or $250 per month.

But if you could swing a slightly higher monthly payment, a 3% balance fee for 18 months would result in just a $5,150, or a little over $286 per month – a faster repayment period and a savings of $100 over the previous example.

It’s also vital to pay the bill on time every month, because if you’re late, the card issuer might yank that 0% promotional period. In fact, you might even be hit with a “penalty rate” higher than the card’s usual interest rate.

Generally you can’t transfer debt to a card held by the same company. So if your Visa is issued by Big Bank X, you won’t be able to get a 0% balance transfer credit card offer from Big Bank X. But that’s OK – other options exist. Even people with a fair credit score can qualify for some of them.

Once you’ve done a balance transfer it’s crucial that you pay on time every month. If you’re late, the card issuer might yank that 0% promotional period out from under you. You might even get hit with a “penalty rate” higher than the card’s usual interest rate – which means you’d be worse off than when you started!

Note: Applying for a new card could affect your credit score in both positive and negative ways. The “hard pull” needed for a card application might mean a slight hit to the credit score. If you get the card, it will reduce the average age of your credit accounts somewhat, which could also ding your score.

On the other hand, having the additional amount of spending power could lower your credit utilization ratio – and that’s the second-most important factor in determining your credit score. Experts suggest using no more than 30% of available credit, and ideally no more than 10%.

For example, if you currently have $10,000 in debt and $20,000 in available credit, that’s a whopping 50% – but if you get an additional $20,000 worth of credit with your new balance transfer card, your credit utilization ratio drops down to 25%. Still not perfect, but once you zero out that debt you’ll be golden.

Remember: Don’t go shopping with the new card, even if the 0% rate applies to new purchases. Charging it up will make it that much harder to pay the balance down. Card issuers know that some people just can’t resist a sale. Don’t be one of those people. Pay your debt off – don’t add to it.

Credit card debt consolidation loans

Again, you’ve got a couple of ways to do this. Here’s what you need to know to make the decision that’s right for you and your finances.

As noted above, a high interest rate can turn a relatively small balance into out-of-control debt pretty quickly. Taking out a credit card debt consolidation loan means paying a lot less interest over the long haul. You’ll also have a fixed rate that won’t change, compared to variable credit card rates.

The loan also gives you an end date. Instead of wondering how long it’ll take to be free of your credit card debt, you’ll know for sure: three years, or however long of a loan rate you choose.

This needs to be said: Those with good credit will get the best loan interest rates. But having a less-than-stellar credit score won’t necessarily keep you from getting a loan. Even if you wind up with a higher interest rate and maybe more fees you’ll still probably come out ahead, given that the average credit card interest rate is 15.10%.

Before you apply for a credit card debt consolidation loan, add up what you owe. Some people never do this because they’re scared of what they’ll find out; instead, they just pay as much as they can each month and hope for the best. Don’t do that: Take charge of your finances like the smart, determined woman you are.

Once you’ve got the total, you can apply with one (or more) of the companies below. Only Sofi, Marcus and Prosper are actually direct lenders. The others put your loan request out to banks and other lenders, and then send you the results. Which is great, because you don’t have to go from place to place and talk face to face.

Companies that offer personal loans you could use to consolidate credit card debt:

  • Marcus by Goldman Sachs

What if you don’t qualify for any of those debt consolidation options?

People who have fair credit (a FICO score between 580 and 669) or bad credit (a FICO score of 579 or lower) are in danger of landing in debt because it’s tough to get decent interest rates on products like:

  • Auto loans (especially at “buy here, pay here” dealerships)  
  • Mortgages (and they may have to pony up a higher down payment)
  • Credit cards  

Consolidating your debt could help you kick-start a better future. Unfortunately, fair-to-bad credit could mean you don’t qualify for any of the debt consolidation options noted above.

It’s a real Catch-22, but you could still pull this off – by repairing your credit. The DIY credit repair approach includes:

  • Checking your credit report for errors
  • Adopting good credit habits   
  • Getting a secured credit card  
  • Using a credit-builder loan  

You might have heard or seen ads for credit repair companies. Some of these places are legit. But some super-shady folks are out there, asking for money upfront and making promises they can’t keep. Do your homework.

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The bottom line

Debt does more than keep you up at night. Every dollar of interest you pay is a dollar that can’t work for you somewhere else: investing, travel, homeownership, helping your kids through college or any of the other things that matter to you.

If you’ve got debt, take control. A personal loan or a 0% balance transfer credit card will save you thousands (or tens of thousands) of dollars, and let you go back to living your best life.

What does consolidate debt mean?

Just what it sounds like: Putting all your debts in one place and paying them off, either with a credit card debt consolidation loan or through a 0% balance transfer credit card. Either of these options can save you some serious bucks.

Longtime personal finance journalist Donna Freedman created the Smart Spending blog for MSN Money and has written for dozens of other publications, including The New York Times Review of Books, NerdWallet, Magnify Money, The Philadelphia Inquirer, Vox, Get Rich Slowly, All You, The Simple Dollar, the Chicago Tribune and Wise Bread. Her work has won regional and national awards. She is a member of Mensa, but people are much more impressed by the fact that she was once on the game show "Jeopardy!" Donna lives and writes in Anchorage, Alaska.

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