Can’t Pay Credit Cards

I caught a great post at Moolanomy last week that described the five stages of financial health.   The first stage, which Pinyo labeled “The Debt Spiral,” is an especially tough one to move beyond.  Over the last few months of writing about personal finances I’ve received several emails from readers with variations of the same problem–credit card debt is suffocating them.  Often they can’t pay credit cards, their mortgage, or their car note.  Most of the messages go something like this:

We are making minimum payments, but don’t have enough cash to live off and to ‘float’ until the end of the month we have to use credit cards again.  When I get my next statement the balance, including a few new charges and interest, is right back up to where it was last month, or higher!

I’ve been on this hamster wheel myself and it is not a fun place to be.

So how does one begin to gain traction and actually reduce credit card debt without adding more to it?

Stop spending with credit cards.   Take a hard look at the expenses you’ve charged recently.  What things could you have lived without?  If these expenses were necessary items (food, gas, power bill, etc.), what other items could be cut from your monthly budget to make room for these expenses?  You are in a hole, and at some point the only way to move towards climbing out is to stop digging.  For the remainder of this plan to be successful you must adhere to this first step and vow to never swipe the card again.

Make two payments per month.  Credit card interest is charged on what’s known as the “average daily balance.”  If you add up your ending balance every day of the month and averaged it, that is the figure that is used to calculate how much interest you pay your card issuer.  One way to drive this figure lower is by making two half-payments each month, at roughly the half-way point in your billing cycle.

Ask for a lower rate.  If you are unable to get a low-interest consolidation loan to pay off credit cards, you may have luck getting your current card’s rate cut.  Many personal finance books advise you to call up your card issuer and simply ask for a lower rate, which they report happens with predictable success.  I haven’t personally had that experience with credit card issuers.  And as a former employee of a credit card issuer I can tell you that approving rate reductions is not the norm.  However, there are a few things for you to consider before calling up your card issuer, in much the same way you would gather some numbers before asking your boss for a raise.

  • Are you a good customer? I don’t mean you pay your bills on time, or pay off your balance as soon as the statement arrives, I mean are you a good customer from the bank or card issuer’s perspective.
  • Are you a profitable customer? Take a look at your last six months worth of statements.  How much interest have you paid?  If you frequently roll over a balance each month, carry a relatively high balance, and don’t have a record of late payments, you will likely have success negotiating a lower rate.  However, if you are habitually late, or do not carry a balance over from month to month it may be more difficult to convince the issuer that you are a profitable customer.

Double up.  If you are stuck with a particularly high rate, and the issuer refuses to lower it, try to double the amount you are required to pay.  Credit card companies aren’t dumb.  They know that by requiring you to pay only 2% of the balance you will be mostly treading water after the majority of that minimum payment is allocated to interest charges.  Pay more than the minimum as often as you can.

Get that fee waived.  Most issuers will remove a fee one or two times per year for good customers.  If you were nailed with a late fee last month, but have since made amends, you may have luck calling the card issuer and asking to have the fee reversed.  This will help bring your balance back down, but won’t lower the current month’s payment due.

Increase your income.   There are only so many tricks one can try to reduce their monthly credit card balances.  In the end, it is all about decreasing your expenses and increasing your income to free up more cash to be applied to debt.  If you can’t pay your credit cards in full, consider taking on a part time job, or asking for overtime at your full time job.  It isn’t fun being away from family to work extended hours, but it is only temporary.  Use every single penny that is earned from this additional work to pay down credit cards.

Available credit is not an invitation to charge.  After you’ve made some progress at eliminating debt card issuers will be on to your plan and start sending out teasers for balance transfers or convenience checks citing your available credit as a potential source of funds to remodel your home or take a cruise.  I know it seems tempting, but remember that promise you made in the first step and hold steady.  To run balances back up would undo all of your hard work put in up to this point.

Making only the minimum payments on your credit cards can be very costly over time. But having a less-than-ideal credit card can be expensive as well. Take the time to investigate some of the introductory 0% interest credit cards to help save money on finance charges. If you like to travel but want to save money, even look to some of the better airlines rewards cards that are still available.


  1. I have a hunch that the majority of credit card debt is amassed not on eggs and milk but rather on consumer crap. Cutting the consumer crap out of one’s diet is a surefire route to reducing credit card debt.

  2. We had the credit card problem before. Our way out was taking out a Signature loan at a much lower interest rate. It took us five years to pay it off, but it worked. It was a set monthly payment and you couldn’t add to it…it only went down. Of course you have to do away with your credit cards too, or else you end up with twice the debt. 😀

  3. As for asking for a lower interest rate….I had read that many, many times before too. So just last week I thought “It’s worth a shot, the worst they can say is no, right?” I called and made the request, was told that some one would call me back within 72 hours. No call back after 72 hours, so I called to follow up. Sure enough, they reduced my rate from 18.5% to 14.9%. Needless to say, I was thrilled. Having said that, my boyfriend tried the same thing with his card, with no such luck. But you never know until you try, right? Loving the blog FrugalDad, keep it up!!!

  4. It is also important to remember that selling assets to pay off debt is another good way to get out of a downward spiral. As Dave Ramsey says, sell your car and buy a beater. Or, clean out your closets and see what you can sell on eBay. Every bit helps in a dire situation.

    I came very near the tipping point of credit card debt earlier this year. Luckily, it coincided with my ability to sell off a piece of property I had no equity in, and I am now able to make substantial credit card payments to successfully implement a plan to pay it off.

    Now, the thought of how easily I was heading into complete financial ruin scares me to death. Luckily, I was able to pull out of the spiral, so I understand how important it is to do so at all costs.

  5. I’ve been making grocery and pharmacy charges on my credit card. The card companies may decide to raise my rates because I’m (obviously) in trouble now, unemployed and buying groceries on credit. Actions…prayer…and I paid the bill in full a few minutes ago. (Thank you Wise Bread).

  6. @Andy: What a wonderful accomplishment! Congratulations on your new-found freedom from credit card debt! Now use that same discipline to build wealth.

  7. Credit card debt is a problem for many people and is a major contributor to personal debt. Funding your lifestyle with a credit card is easy but the hard part is paying it off and clearing the debt.

  8. You can also help your credit score by paying just a dollar more than your minimum amount due. This is tracked in the “paid more than minimum amount” section of the credit score/report.

  9. First make a budget. That has really helped me in my struggles. I have just started and just making the budget has gotten me really motivated. I also cancelled a credit card and they charged me the annual fee. I called them and they did take it back off since i am/was a good cusomer.

  10. Many people (especially here in U.S) have not a clue of how to handle their credit cards. The best evidence on this is the average $9000 debt per household and $960 billions for all the States. I think we should introduce a course that anyone who wants a credit card must pass. On that way we will be able to avoid alot of the pitfalls that comes with the credit cards.

  11. I have a credit card that has a minimum payment of $132. I am a good customer, I carry a balance every month like the credit lender wants me to. I always make my payment on time. I have not been making more than the minimum on this account because I have various credit cards that I am trying to pay off. How can I get that minimum payment lowered? I have however paid off 4 other lines of credit all balances ranging from $600 to $1500. I still make all my payments on time with all credit cards and even my bills. Any suggestions?