Credit Card Repayment Strategies to Avoid

Get Legal Help Today

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Jul 15, 2021

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Getting out of credit card debt is not as easy as getting into it. Most advisors tell you to stop using your credit cards and pay off what you can, starting with the cards that have the highest interest rate. Other strategies include transferring your balances to a card with lower interest rate and getting a debt consolidation loan.

However, these are only temporary measures to ease the symptom. They won’t solve the underlying problem unless you stop spending more than you can afford. Simply put, pay off the debt, then figure out exactly what you can spend and stay within that limit.

Avoid Repayment Schemes

Advisors may also warn you not to turn to any of the widely touted repayment schemes that look tempting on the surface, but can create more problems than they solve.

One such temptation is a home equity loan. These often come with points, fees and other hidden costs, even though they are easier to obtain than a home mortgage loan. It is not generally advisable to put your home in jeopardy—which is what you do if you don’t meet your payments—to pay off your credit card debt. This kind of loan, with its unexpected costs and real downside, won’t solve the problem of undisciplined spending. It merely makes it easier for you to lose your home.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption

Avoid Turning to Retirement Savings 

Dipping into your retirement savings is also a bad idea, not only because you will face a 10 percent early withdrawal penalty but also because you will be taxed at a normal rate for any funds you withdraw. That means you are paying a huge penalty to pay off your credit card debt and also robbing yourself of funds you may need for your retirement.

Taking Out Cash Advances 

Taking a cash advance on one credit card to pay off the debt on another is also a bad and potentially costly idea. Cash advances come with a fee, often about 3 percent of the amount advanced, and high interest rates that start immediately

Yet another bad idea is taking an advance, or loan, against your next paycheck. Finance companies make these loans easy and with good reason. Both fees and interest are high. This is no solution to your credit card debt, only one that perpetuates the problem and makes it worse, especially if you get into a cycle of borrowing against each next paycheck.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption