What is My Best Option for Reducing My Credit Card Debt at This Point?


Dear Steve,

Hi Steve,

I am $15,000 in credit card debt and have $4,000 in a student loan at 6.8%. I am interested in a fast payoff of debt. My current cards are at 25%-30%. I was wondering what my best option at this point is?

I was wondering what is my best option at this point.



Dear Martin,

Thank you for your awesome question.

It’s a little rough giving you a roadmap with such limited information. Keep that in mind as we step our way through this.

If you can afford your monthly minimum payments on your credit cards and it is the interest rates that are killing you, then this is one of those times that it could make sense to look closely at a credit counseling program like Consolidated Credit Counseling.

Depending on who your creditors are, your interest rates will be reduced when you enroll in that program. There is no gain without some pain, though. Your creditors will most likely close your accounts.

Each month you would make one payment to the credit counseling group, and they would divide it up and send it off to your creditors. Since your accounts would be closed, you may have to focus on boosting your credit in the future.

The credit counseling program might not reduce your monthly payment by much, but it will significantly reduce your interest rates if that is your top concern.

Before you leap to enroll, I want you to think about such a program’s affordability if you are currently unable to save money each month. If you sacrifice saving money by diverting all of your extra dollars towards paying down debt, it will be easy to stumble and fall in the future. But building rockstar credit is not that hard to do with some effort.

Let’s say a credit counseling program will take about five years of payments. During that time, you are unable to save money because things are tight. And like most people, you might not have sufficient savings to tap if you have a financial emergency. What will happen then is the emergency will land on credit again, and you will start having to dig out again.

It will truly be two steps forward and one or two steps back.

So if you can get the interest rate reduction in the credit counseling program and keep building your emergency fund simultaneously, that’s a better result.

Better yet would be the ability to participate in any retirement plan your employer might offer and the credit counseling program with a savings component. If participating in the credit counseling program means you can’t afford to save for retirement or keep participating in an employer-sponsored retirement plan that provides matching money, you are throwing money away.

Again, I’m not saying you should not participate in the credit counseling program. I want to make sure you have all the information to make the best decision for you in your unique situation. To see how much in retirement savings you could lose by stopping retirement plan payments to reduce debt, use my online calculator here.

The student loan is not a horrible interest rate, and the easiest way to reduce the overall interest you will pay on the loan is to send more than the minimum payment each month. Try to round up to the next hundred dollar mark. The faster you reduce the balance; the less interest will be charged on the outstanding balance.

Given that I did not have much to go on here, I would be remiss if I did not mention bankruptcy as an option. Bankruptcy will probably not eliminate your student loan in most cases, but it can eliminate your credit card debt in about 90 days at the cost of about $2,000.

You can find a good local bankruptcy attorney and have a free discussion about what bankruptcy would mean for you. Bankruptcy is the fastest way to get a fresh start for the least amount of money.

I might have given you an avalanche of information to consider here, but there is a lot to think about so you can make the right choices to make your future better.

The smart move would be to talk to the credit counseling group and also talk to a bankruptcy attorney if you are unable to save and pay down your debt at the same time. You can contact both an attorney and the credit counseling group and then think about the information each debt relief provider has given you. Don’t feel you need to rush into a decision. Think it over for a few days.

Finally, I did not mention a debt consolidation loan because the rates are getting a lot less attractive. A true debt consolidation loan has interest rates drifting up because the unsecured loans are risky for the lender.

Please post a comment below and let me know what you decide to do.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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