You’ve swiped the magic plastic until you can’t swipe anymore, and now your credit card is maxed out. To make matters worse, your credit card issuer refuses to grant a credit limit increase, and you’re strapped for cash.
Unfortunately, this scenario is bound to happen if your spending is out of control, or if you rely on credit cards to get you through the month once the other well, your bank account, runs dry.
Either way, here are a few suggestions to help dig you out of a financial hole.
Put the Credit Cards Away
Although it may be tough to get approved, many individuals who heavily rely on credit cards to subsidize their cash flow often resort to applying for new credit accounts, even if the old ones are maxed out. If the application is approved, the card will typically be accompanied by a high interest rate due to your level of risk to the creditor.
If you’ve failed to properly manage all of your other credit cards, it might only be a matter of time before the new one is maxed out. So, go ahead and retire the credit cards once and for all, and work on paying down your debt.
Establish a Spending Plan
Once you have disciplined yourself to stop using the credit cards, develop a budget based on your bare necessities, and not desires. Also, be sure to incorporate a slight cushion as it may be a little difficult to follow the plan for the first few months. Since money’s tight, your sole focus should be on meeting your monthly obligations and paying down the outstanding credit card debt with any spare funds in your possession so you can work toward becoming financially fit.
When setting up your spending plan, be realistic and refrain from deprivation tactics as they will cause your plan to backfire. If your grocery bill is $100 per week, only allocating $25 may be a stretch. And it’s OK to go on a romantic date occasionally, as long as you incorporate it into your spending plan.
Stash Away a Little Cash
Using every spare dime in your possession to pay down debt can be a recipe for disaster if an unexpected financial burden arises because you will have to resort back to the magic plastic. So, before you start tackling those outstanding balances, work toward building up an emergency fund so a tire blow-out doesn’t become a financial nightmare.
What if your income just won’t cut it? If you’ve reduced all of your expenses and are barely making it by, it may seem impossible to save money. To supplement your income, try your hand at freelancing or pick up a part-time job. Also, list some of your unwanted items in an online marketplace or have a yard sale. Once you have established an emergency fund, use the extra funds to pay down your balances.
Reach Out to Your Creditors
Even if they’ve refused to grant you a credit limit increase, it is still a good idea to see if your creditor is willing to work with you on the interest rate or payment terms. Be sure to inform them that you are in dire financial straits, and making the payments is a challenge. You never know what their response will be unless you ask.
Implement a Get-Out-of-Debt Plan
You must have a method to the madness to get out of debt, but any past-due balances should be your first priority. Once you have caught up and established an emergency fund, it’s time to start tackling your debt. There are a number of ways to go about doing so.
By following these suggestions, you’ll find extra cash in your arsenal and get out of debt much quicker than you initially expected.
More on Managing Debt:
- The Credit.com Debt Management Learning Center
- How to Pay Off Credit Card Debt
- 5 Tips for Consolidating Credit Card Debt
- Understanding Your Debt Collection Rights
- The Best Way to Loan Money to Friends & Family
- Top 10 Debt Collection Rights