How to get rid of credit card debt when living paycheck to paycheck

Credit card debt can be tough to tackle for those living paycheck to paycheck. After all, when you’re living on a tight budget, every dollar counts. And, as cooling but persistent inflation continues to drive up the cost of everything from housing to groceries, tackling your substantial credit card balances in addition to your regular bills can feel impossible. 

Credit card interest rates are also hovering near record highs right now, which can cause your credit card debt to grow quickly. As the interest charges compound, it may be more difficult to find room in your budget to cover your ballooning credit card balances — making it difficult to make improvements. 

But it’s crucial to remember that there are paths forward, even if your financial resources are limited. From do-it-yourself (DIY) methods to more structured programs, there are credit card debt relief strategies you can use to regain control of your finances and work toward a debt-free future. 

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How to get rid of credit card debt when living paycheck to paycheck

If you want to get rid of your credit card debt but don’t have much flexibility in your budget, the following options could be worth considering:

Lower your interest rate with a debt consolidation loan

When you consolidate your debt, you take out a new loan, typically with a lower interest rate than your credit cards, to pay off what you owe. If you’re living paycheck to paycheck, a debt consolidation loan can be useful in terms of simplifying your budgeting and potentially lowering your monthly payments. And, if you secure a debt consolidation loan with a low enough interest rate, the interest savings could be substantial.

Qualifying for a traditional debt consolidation loan with favorable terms may be challenging if you have a low credit score or limited income. That said, the debt consolidation programs offered by debt relief companies may have more flexible lending parameters, making them a good option to consider. If you’re already stretched thin, though, a debt consolidation loan payment may not fit in your budget. In that case, you may need to take more drastic measures.

Find out how the right debt relief company could help you get rid of your high-rate card debt now.

Use a debt management program to make your debt more affordable

With a debt management program, you work with a credit counselor to create a repayment plan for your debt. During this process, the counselor will try to negotiate with your creditors to reduce the interest rates and fees on your credit cards. You then make a single monthly payment to the credit counseling agency, which distributes the funds to creditors.

These programs can be beneficial if you’re struggling to make your card payments, as they can make your card debt more affordable. However, it can take a few years to pay off what you owe, and you typically have to close your credit card accounts as part of the program requirements.

Have a portion of your balance forgiven with a debt settlement program

Debt settlement (also known as debt forgiveness) involves negotiating with your creditors to pay less than the full amount owed on your cards. With this option, you typically stop making payments to your creditors and make monthly payments to a debt relief company instead. 

That money is saved in a dedicated account, and once enough has accrued, the debt settlement company tries to negotiate lower lump-sum payments with your creditors on your behalf. If an agreement is reached, you pay the settled amount from your savings, and the rest of what you owe is “forgiven” by the credit card company.

Paying less than what you owe to settle can make it easier to get rid of your card debt. However, there are some drawbacks, like damage to your credit score and extra tax liabilities — and there’s no guarantee that creditors will accept settlement offers, either.

Use a balance transfer card to temporarily wipe out interest charges

A balance transfer credit card lets you move your high-interest credit card debt to a new card with a low or 0% introductory APR. That can provide significant interest savings and allow more of your card payments to go toward the principal. 

It’s worth noting, though, that balance transfer offers can vary — the 0% APR periods may be anywhere from 12 to 21 months, for example — and you’ll typically pay a balance transfer fee of between 3% and 5% of the transferred amount. It’s also important to note that if your credit is damaged or you have a high debt-to-income (DTI) ratio, it may be challenging to qualify for cards with the best terms.

The bottom line

When living paycheck to paycheck, addressing your credit card debt requires careful consideration of the available options and their potential impacts. Each method has its pros and cons, and the best choice depends on your circumstances. For some, a combination of strategies may be most effective, like creating a strict budget and using a balance transfer card or debt consolidation loan to accelerate progress. Others may find that a more structured approach, like a debt management program, provides the support and accountability needed to succeed.