I racked up $85K in credit card debt, and now I'm struggling with a $1,837 monthly payment while only earning a $58K salary. What should I do? (via MarketWatch Picks)
Question: Over the past few years, I’ve accumulated $85K in credit card debt. I was working two jobs and making $100K per year, but once COVID hit, I lost my second job and haven’t been able to find another one that pays anywhere near what I was making before. I joined American Consumer Credit Counseling, a non-profit counseling agency, and they got my card companies to reduce their interest rates, but I am paying $1,837 a month, while only earning a $58K salary.
Answer: First of all, you should be proud of yourself for getting this far in your repayment plan, says Matt Schulz, LendingTree chief credit analyst, who also notes that you’ve likely already eliminated a chunk of your debt. You also live very frugally, and made a helpful move in getting your interest rates lowered, which is something readers in deep credit card debt should look to do, too.
So instead, Schulz advises that you get on the phone with your credit counselor and let them know that you’re now earning less money. “They need to find some way to extend that payoff period and reduce their monthly payments,” says Schulz. Marguerita Cheng, a CFP Board ambassador, says the same, noting that existing customers enrolled in debt management programs can contact customer service and explain their situation to try to get more manageable payments.
And it may even be worth considering other options beyond the debt management plan, if the counselors aren’t willing to work with you. “You can try getting a zero-percent interest balance transfer credit card and moving your debt onto that. But with your credit score, there’s no guarantee you’d be approved for the card and if you are, the credit limit might not cover the amount that you owe,” says Schulz.
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