Managing High Credit Card Debt: Strategies for Recovery

Excessive credit card debt may be $5,000, $10,000 or $30,000 depending on the size of your credit lines and your income. Typically, debt is considered excessive when it is greater than 50% of your total credit limits. It is also possible you are in excessive credit card debt if you have carried a balance for more than 6 months without paying down any of the principal. You are the only one who truly knows when your credit card debt has become excessive; it is hard to recover from excessive debt. The best way to protect yourself against debt is to implement proven strategies to control your debt and spending.

Manage Your Credit Limits Closely

There was a time when banks were very loose with credit limits. Today, banks place strict restrictions on credits card limits. If you have good credit, though, banks still may extend large credit lines. You do not have to accept their high limits. If you feel you may spend too much, state the maximum limit you would like applied to your credit card. You can limit your spending to $2,000 simply by making $2,000 the maximum allowed on your credit card. To keep a healthy credit score though, you should not carry a balance of more than 10% of your credit limit.

Limit the Number of Cards in Your Wallet

Applying for too many credit cards can get you into trouble. Every department store, grocery store and airline has a credit card these days. This does not mean you need them all in your wallet. Choose your credit cards based on the products and services you need most. Consider the benefits and rewards of using the store card rather than your typical bank card. Only apply for the card if the benefits are significant and reasonably attainable.

Commit a Budget to Writing

Controlling your spending is the number one way to prevent excessive credit card debt. A good rule of thumb for budgeting is to start with your monthly income after taxes. Cut this figure in half. Subtract your mortgage or rent, auto payment, utilities and any other fixed payments such as student loans or child support. How much is left over? This is the amount you can afford each month to pay off additional debt. Manage your debt so the payments are within this small window. Write this budget down. Share the budget with your spouse or a close friend. Studies show that by writing your budget and sharing it with others you will be more accountable.

Seek Debt Management Solutions

If you are facing excessive debt, you may look to debt management or consolidation solutions. These typically come with high interest rates, but the principal you owe can be reduced through these negotiations. Additionally, your payments can be simplified to help you keep better track of what you owe. Once you negotiate your debt down and successfully make payments, implement the above strategies to prevent similar actions in the future.