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Earn a high-yield savings rate with JG Wentworth Debt Relief
Owing money on credit cards has become so normalized in modern society that it’s easy to overlook just how quickly those balances can spiral out of control. We’re inundated with promotional “zero interest for 18 months” offers. In fact, most people start racking up credit card debt right out of college just to make ends meet.
But at what point does owing on those little rectangles of plastic become a red flag that you’ve taken on too much high-interest credit card debt? Is there even such a thing as having an excessive or unmanageable amount for the average consumer?
The answer, according to most financial experts: Yes, there is very much a threshold where credit card balances become an economy-crippling burden. Ignoring that threshold can quickly lead to a cycle of debt, damaged credit, and potential bankruptcy that could haunt you for years.
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
Defining “too much” credit card debt
So, what quantifies an unsafe or unmanageable level of credit card debt? There’s no single magic number since personal finances are, well, personal. However, there are some rules of thumb to evaluate whether you’ve entered the debt danger zone:
- The 30% debt ratio: A common guideline is keeping your total minimum credit card payments below 30% of your monthly take-home income. Exceeding that ratio indicates your required payments potentially exceed your ability to reasonably cover necessities.
- The 6-month repayment rule: Another metric is tallying whether you can realistically pay off all outstanding card balances within 6 months if using 20%+ of your income. Longer than that points to excessive revolving debt becoming entrenched.
- Your total balance to income: Most financial advisors caution when your total credit card debt load exceeds your annual income. If you owe more to creditors each year than you even earn, that’s an extremely unstable position.
- Your credit utilization ratio: Owing more than 30% of your combined credit limits across all cards can hurt your credit score due to a high utilization ratio. So, maxing out cards or constantly hovering near limits could indicate unsustainable obligations.
Rules of thumb aside, the most obvious sign of too much debt is chronic stress and anxiety about making minimum payments each month or feeling like you’re perpetually treading water with balances. That psychological burden is a huge red flag.
Options for getting ahead of excessive card debt
If any of those guidelines indicate you’ve ventured into excessive credit card debt territory, don’t panic. There are multiple potential avenues for getting that debt under control:
- Debt snowball or avalanche: Pay high-interest balances first (avalanche) or smallest balances first (snowball) using aggressive lump sums rather than minimum payments. Popular methods for debt elimination.
- Balance transfers: Transfer high-interest balances to a new card offering 0% APR promotions for 12-18 months to tackle principal debt instead of just interest.
- Credit counseling: Non-profit credit counseling agencies can negotiate lower interest rates and consolidated payment plans directly with your creditors based on your ability to pay.
- Debt settlement: As a last resort before bankruptcy, you can attempt to settle and pay a negotiated lump sum for less than what’s owed to resolve debts, though it ruins credit.
- Bankruptcy: Personal bankruptcy filings, though impactful to your credit for years, can eliminate or restructure excessive unsecured debts you’re unable to reasonably repay.
Of course, strategies like bankruptcy or debt settlement should be absolute last resorts explored only after exhausting all other options to repay what you owe. Taking proactive steps sooner is always ideal.
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Call in the credit card calvary
If your credit card debt is starting to negatively impact your way of life, why not give JG Wentworth a try? Our Debt Relief Program * is a viable path forward for anyone with $10,000 or more in unsecured debt, and the perks are exponential:
- One monthly payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- 24/7 support
- We only get paid if we settle your debt
Want to learn more about how we can help you avoid, or resolve, defaulting? Contact our team of dedicated debt resolution specialists today to answer any questions you may have.
The bottom line on maxed out plastic
Racking up debt has become so commonplace that it’s easy to rationalize always owing on credit cards as no big deal. But that mentality can quickly lead to a false sense of security until balances start overwhelming you.
If you find your ratio of debt to income becoming uncomfortably high and minimum payments consume too large a share of your monthly budget, that’s a glaring signal to get ahead of the problem. Because as countless Americans can attest, ignoring excessive credit card debt only ensures those problems spiral into far more serious financial hardship down the road.
SOURCES CITED
Thorton, D., “How America racked up a $1 trillion credit card bill.” CNBC. December 3, 2023.
Leonhardt, M., “College students are spending more on credit cards—but it’s ‘one of the worst’ types of debt, expert warns.” CNBC. May 12, 2021.
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* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.