Seven signs your credit card debt is out of control — and how to fix it
Recognize the warning signs and take the first step toward becoming debt-free.
Contributing Writer at Tally
September 26, 2022
Wondering if your credit card debt is out of control? It's a more common situation than you might think.
The average credit card holder in the U.S. has $5,934 in debt, and many households have substantially more.
Let's be clear: There’s no shame in having credit card debt. It’s time to break the stigma that often comes with debt.
But there are a few simple steps that can go a long way in fixing the situation. The most important thing you can do is recognize and acknowledge the problem. Once you do, a steady approach and consistent discipline will put you on the road to becoming debt free.
Here are some warning signs that your credit card debt is out of control and how to get yourself out of credit card debt
You worry too much (or too little) about your credit card debt
If your credit card debt is keeping you up at night or distracting you at times when you should be focused on something else, that’s a sign that something needs to give.
Credit card debt is a major source of stress and anxiety for many people, and that stress isn’t unique to people in debt. A majority of people experience some form of anxiety over their credit cards. In some cases, that anxiety is comparable to what people feel while awaiting medical test results.
On the other hand, if you notice yourself trying to avoid thinking about your credit card debt or if you’re keeping your debts secret from your loved ones, now’s the time to address it head-on.
It’s natural to ignore things that are causing stress in your life, but blocking out your debt from your mind will only cause it to get progressively worse due to interest accruing. As your debt grows, so will the level of stress associated with that debt.
Advice: Put the problem in real terms and make a plan
It’s time to get serious about your debt, and that starts with acknowledging it and then making a plan. Here’s how to start getting yourself out of credit card debt.
Gather all of your statements showing outstanding balances.
Create a document listing when each payment is due.
Then list your accounts in order from highest interest rate — these are the ones you want to pay down first — to lowest interest rate. This debt repayment strategy is known as the debt avalanche method.
Calculate your monthly net income and the expenses you need to live, e.g., housing, food or utilities. This is crucial information to have on hand as you start to piece together your plan for wiping away your credit card debt.
Use your income and expenses to create a realistic budget that you can follow.
Determine how any extra money in your budget each month can be used to pay off debt.
Experiment with your budget to see how reducing expenses in certain categories could help you pay off your debts faster.
For more information, see our full guide on how to pay off credit card debt.
You max out your cards or regularly hit your credit limits
If your credit card has been maxed out, there's a good chance your debt is out of control. The same is true if you’re making partial payments every month and consistently hitting your credit limit.
This is an uphill battle that you can’t win: Interest rates will prevent you from ever getting out of debt this way.
Advice: Put down the cards and walk away
If using your credit card is simply irresistible, remove the temptation. Throw the cards in a drawer or give them to someone you trust.
Once you do this, you’ll start reducing your debt and without adding to it (outside of the interest you’re accruing).
Here are some other strategies to reduce your dependence on credit cards:
Start using your debit card exclusively.
Switch to using physical cash.
Remove saved credit card information from online accounts and apps, e.g., Amazon.
You use your credit cards without a plan
When you use a credit card, it should always be according to a plan. Maybe it’s to take advantage of a rewards or cashback program. In that case, the plan is to earn bonus rewards on expenses that you’d have anyway.
But if you’re just using credit cards because you can’t afford the expense outright, that’s where you can get into trouble.
As a rule, you should never use a credit card unless you have an actionable plan for paying off the debt as soon as possible.
At times, it may be necessary to rely on credit cards to cover necessary expenses like groceries. After all, sometimes money is just too tight. But the second you start using credit cards for optional expenses, like entertainment or dining out, that’s a warning sign to take a step back.
Advice: Create a strict spending regimen
Most of us would benefit from cutting non-essential expenses from our monthly budgets. If you have a problem with credit card debt, look for manageable ways to reduce your spending.
There will be difficult decisions — passing on a wardrobe upgrade, declining a vacation invitation — but it’s necessary if you ever want to get out from under your growing debt.
Here are some ideas to help you keep spending in check:
Make a budget and stick to it.
Create fun challenges like “No Spend Saturdays.”
Explore different ways to cut costs on everyday spending.
Wait a few days before buying anything optional — if you still want or need it, then move forward with the purchase.
You can barely make a dent in your balance
You’re making payments every month and you’re even limiting your expenses. But whenever you get a new bill, your balance just hasn’t dropped as much as you expected.
That’s because your payments are too small to offset your interest charges, and it's a sign your credit card debt is out of control. Learn more about how APR affects your credit card debt to find out why.
Paying the minimum amount you owe on your credit card balance is, of course, better than missing a payment — but it won’t make a major impact on your debt.
And it definitely won’t help you get out of debt quickly. It’s more like kicking the can down the road.
Advice: Be methodical about your payments.
This goes back to the debt avalanche method. But before you do that, start by making sure you never miss a payment.
When you miss a payment on your credit card balance, your credit score is penalized and you’ll actually end up owing even more money. And if you miss consecutive payments, the credit card issuer can increase your interest rate, making your uphill slog even tougher. Instead, identify which balance has the highest interest rate and focus all your attention on paying it off while still making minimum payments on your other balances. After you pay off the balance with the highest interest rate, move on to the second highest.
It isn’t realistic to pay down all of your cards equally and expect to close the balances around the same time. A one-by-one approach is the most efficient option in terms of both time and resources. Over time, the debt avalanche method saves you the most money.
Here are some other ways to ensure you stay on top of payments:
Set up automatic payments (for at least the minimum payment due) on all your credit cards.
Set reminders in your calendar to pay bills (this is particularly helpful if you plan to pay more than the minimum payment due).
Make extra payments when you have extra funds.
Your shortcuts don’t actually help
Many credit card companies allow balance transfers on new accounts that have an interest freeze for an introductory period. This may seem like an enticing option if you’re struggling to pay down debts.
But if you’re just transferring your debts from one place to the next without making a significant dent in the balances, this solution isn’t right for you. Plus, balance transfers often come with their own fees, which can often be in the range of 3% to 5% of the amount transferred. That means if you transfer $1,000, you’ll likely have to pay $30 to $50 upfront.
Another misguided move is trying to pay down your debt by taking on other forms of debt. This includes:
Check advance loans
Importantly, many of these so-called “solutions” are basically the same thing, just different names with exorbitant interest rates. Don’t be fooled: These options will only dig the debt hole deeper.
Advice: Set a goal and stick to it.
One of the keys to getting out of credit card debt is being realistic. Set a reasonable date and then take the necessary steps to achieve your goal within that time frame.
It’s helpful to utilize the SMART goals framework, which stands for Specific, Measurable, Achievable, Relevant and Time-Bound.
Here’s an example of a SMART goal when it comes to paying off debt:
I will pay off [credit card A] by December 31st of next year. I will make extra payments of $100 per month towards the balance, in addition to the minimum payment. I will check in to monitor progress every three months and make adjustments as needed.
It’s important to keep things realistic. If you have thousands of dollars of credit card debt, breaking goals down into smaller chunks may be wise.
Your credit score is taking a hit
Your credit score is worth protecting. If credit card debt is causing your credit score to drop, that should be a major sign you need to turn things around.
While some actions only have a minimal effect on your credit score, carrying too much debt relative to your credit limit accounts for about 30 percent of your score.
If you haven’t checked your credit score in a while, but notice your applications for new credit cards are getting denied, it’s a sign your score has gone down.
Advice: Monitor your score and take steps to improve it
First, check your credit score. You can do this using a free tool like Credit Karma or Credit Sesame. Or, better yet, you can request a free credit report once per year from AnnualCreditReport.com.
Next, take steps to improve your credit score. Some important steps to take include:
Ensure you make on-time payments on all your debts every month.
Check your credit report for errors and request that they be fixed.
Lower your credit utilization by paying off debt or requesting a credit limit increase.
You’re relying on credit cards for many daily expenses
Sometimes, we simply don’t have enough funds to meet our daily needs. In this case, it can be tempting to rely on credit cards.
And in some cases, it’s completely necessary to use credit cards to cover gaps in your budget. After all, going into debt is better than going hungry.
But at the same time, this is not a sustainable solution. One way to dig yourself out of this tough situation is to take steps to increase your income.
Advice: Find ways to increase income and reduce expenses
First, focus on any potential ways to increase your income. This could include:
Get a part-time job.
Pick up a side-hustle.
Ask for a raise at work.
Sell possessions that you no longer use.
At the same time, you can take steps to reduce expenses where you can. This could mean canceling a subscription that you rarely use or cutting back on discretionary spending like restaurant meals.
Recognizing your credit card debt is out of control starts with being brutally honest with yourself. You need to fully understand the depth of your problem instead of trying to hide from it.
No matter how bad it seems, it’s never too late to reclaim your financial freedom. Follow the tips above to address the question of how to get yourself out of credit card debt.
Tally† may be able to help. Tally helps qualifying applicants consolidate credit card balances into a lower interest line of credit. Learn how Tally works here.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.