What you shouldn’t do when paying off credit card debt

When your financial boat is sinking due to a massive load of credit card debt, your first task should be to unload it as soon as possible. No matter how soon you want to get out of credit card debt, there are a few things you should never do. For instance, you should never take out a payday loan or a pawn loan to pay your credit cards. The interest rate is very high and the loan repayment term is too short.

Here are a few other things you should never do to pay off debt fast.

1. Ignoring your budget: One cardinal rule of getting out of debt is ‘reduce your expenses and pay more towards your debts.’ If you don’t create a personal budget and follow it, you’ll be in a big trouble. You can’t track your income and expenses. You can’t find out the areas where there is a big scope for saving money. Remember, if you don’t save money and make extra payments on your credit cards, it will be tough to get rid of debt.

2. Filing bankruptcy immediately: Bankruptcy might be an easy way to solve your debt problems but it’s not the best option to pay off debts. Rather, filing bankruptcy can be your biggest financial mistake. Here is why.

Bankruptcy drops your credit score by more than 200 points. Moreover, it stays on your credit report for 10 years. If you want to buy a home within 2 years, it will be extremely difficult since you won’t qualify for a private mortgage loan.

3. Taking out a home equity line of credit: There is a major difference between a home equity line of credit and credit card debt. A home equity line of credit is a secured debt. This implies if you fail to pay off a home equity line of credit, the lender can foreclose your property.

Credit card debt is unsecured debt. If you fail to eliminate credit card debt, your creditors can file a lawsuit against you and attempt to garnish your wage. But they can’t foreclose your property.

When you take out a home equity line of credit and pay your credit cards, you convert the unsecured debt to a secured debt. This is bad since you could lose your home if you miss payments.

The interest rate on a home equity line of credit is lower than credit cards. Moreover, you can get a tax deduction for the interest on the loan. Still, you should not use a home equity loan to pay back your creditors.

4. Ignoring the credit score factor: I don’t think there is any need to explain the importance of credit score in our life. Yet, many people overlook it at the time of choosing a debt relief program. If you choose a debt relief program that can lower your score, then it will take a lot of time to rebuild credit.

When you’re choosing a debt payoff plan, choose it wisely. Try to choose a plan that won’t hurt your credit score severely. Find out how a debt relief plan affects your credit-utilization ratio. If it helps to lower your credit-utilization ratio, then go for it.

5. Throwing away extra money: I have seen many people wasting windfalls on vacations, shopping, eating out, and other useless activities. They just don’t look at the bigger picture.

When you have extra cash, use it to pay off your debts or create an emergency fund. Use a debt payoff calculator and find out how extra payments will have an impact on your payoff timeline.

6. Playing an individual game: It is tough to get debt relief when you work alone on your debts. Let me explain this in detail.

Suppose, you lead a frugal life, save money, and make monthly payments to your creditors on time. But your spouse doesn’t stick to the budget and spends money recklessly.

What will you do then? Your hard work is completely wasted.

When you’re in debt, you need to work together as a team to get out of it. You need the full cooperation of your spouse. Both of you should set a goal, create a plan, and work hard for paying off debt.


I have seen many people using credit cards for paying everything else off. They keep charging their credit cards and stay in debt at the end of the year. Don’t do this mistake. Even if you have low-interest credit cards, stay away from them after joining a debt relief program. You shouldn’t derail any progress you have made till now.

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