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Top Reasons You Can’t Get Out of Debt

Updated: September 26, 2023

You Keep Spending On Credit

It doesn’t make sense to keep adding to the debt that you are trying to pay off. Next time you go shopping, leave your credit card at home. You may consider freezing it, or locking it away so you won’t be tempted to use it. If you have to, cut the card up for the time being and have a new card reissued once you have been able to pay down your debt.

Stop Spending on Credit - Woman online shopping on phone using a credit card to pay
Retail Store Credit Card - SALE sign on store window

You’re Opening Retail Store Credit Cards and Using Them

Many retail stores offer their own credit card that you can apply for. However, the interest rates on these credit cards can be very high. Try to resist the temptation to open new retail credit cards and charge your purchases on them. If you carry a balance on these cards, you will likely be paying a ton of interest, not to mention adding to your debt.

You’re Only Paying The Minimum

Only paying the minimum balance is not enough to get you out of debt at a fast rate. The longer you take to pay off your debt, the more interest you will pay. For example, let’s say Sally has a $5,000 balance on one of her retail store cards, with an interest rate of 12% APR, and she only makes the minimum monthly payment of $100. In this situation, it will take Sally 70 months to pay the card off in full. By the time everything is said and done, she will have paid an additional $1,966 in interest, making that original $5,000 balance $6,966 in the end. This example illustrates how much interest can build up and how long it could take someone to pay off debt when only making the minimum monthly payments.

Only Paying the Minimum Payment - Bill with minimum payment listed
You're Spending More than You Make - Man holding empty wallet

Spending More Than You Bring In

One of the biggest reasons for falling into debt is spending more money than you bring in. Do your best to avoid spending more than you bring in every month. Focus on paying off your current debt, not adding to it.

Leaving Balances On High-Rate Cards

If you have large outstanding balances on high-rate credit cards, consider paying these balances off first. If you find that your outstanding balances are too high, consider speaking with a Launch CU loan specialist about applying for a personal loan to help consolidate your debt, or consider a balance transfer to a credit card with a lower interest rate. Personal loans often have much lower interest rates than credit cards and have a set term to pay off the loan.

High Interest Credit Cards - Woman holding bills
No Exit Sign

No Plan To Get Out

The top reason you may not be able to get out of debt is that you don’t have a plan to help you achieve this. It’s nearly impossible to make strides toward reducing your debt if you don’t have a plan of action in place. Start by making a budget, including all of your financial obligations. A budget will help you determine how much you’re able to put toward your debt every month. Launch CU also offers a variety of financial resources to help you manage your money, such as Debt In FocusFritter FinderMoney Management Planner, and more.

Tips To Get Out Of Debt

While your debt may seem like a dark shadow that will never go away, we are here to tell you that it is possible to overcome your debt and live a more stress-free life. Here is a list of five things that could help you reduce your debt, so you can experience more financial freedom this year.

Stay away from companies that promise to clear your debt quickly

A simple Google search will return thousands of results for companies that promise to rid you of your debt quickly. Be very wary of companies that make promises to make your debt disappear overnight. Getting rid of debt is a marathon, not a sprint. It requires patience, guidance, and a plan. Getting out of debt is not impossible, but getting out of debt overnight is.

Stay Away from Companies That Promise to Get Rid of Your Debt Fast - warning key on keyboard
Cut excess spending - woman pulling twenty dollar bills out of her wallet

Cut excess spending

If you are serious about wiping out your debt, you need to cut all excess spending. This may require you to make sacrifices in your personal and social life. Getting yourself out of debt may put a hindrance on your social life, but in the end, being debt-free will lead to less stress and a higher quality of life.

Consolidate your debt with a personal loan

If you have many debt accounts, it may be hard to keep track of who and how much you owe. Owing money to multiple companies can result in paying interest on all your accounts if you can’t pay the balance off in full. One option that may be able to help you avoid this is to apply for a personal loan. A personal loan could help you consolidate all or most of your debt accounts into one loan, which makes paying off your debt easier. A personal loan could help you avoid paying interest across multiple accounts, making it cheaper to pay off your debt. Lastly, since personal loan rates are typically lower than credit card rates, you could save a lot on interest charges.

Consolidate Debt with A Personal Loan - a man and woman looking over documents on a table together
Consolidate Credit Cards - Multiple credit cards in a waller

Consolidate your credit card debt with a balance transfer credit card

If you have a high-rate credit card that you carry a balance on, you may be shocked to know what your interest rate is. Big bank and retail credit cards oftentimes charge interest rates of over 25%, which can make paying off your debt a difficult task. Next time you get your credit card statement, check your interest rate. If you see upwards of 20%, consider applying for a low-rate Launch CU credit card.

Final Word On How To Get Out Of Debt

Debt doesn’t have to be a never-ending downward spiral. There is a way out. You can get out of debt, you just need to make smart decisions based on your current financial situation. Most importantly, if you have large amounts of credit card debt, stop spending on credit, and focus on paying off your outstanding balances. Also, check out our previous blog post for more tips on how to get out of debt. Remember, you are not alone in your debt. Launch CU is here to help in any way that we can. Our goal is to help you go beyond to reach your financial and life goals.

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