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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: insta_photos/Getty Images July 15, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Ted Rossman is a senior industry analyst at Bankrate.com. He focuses on the credit card industry and helps consumers maximize rewards, get out of debt and improve their credit scores. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo

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At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo

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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A reader — let’s identify him by his initials, A.R. — reached out to me seeking some debt payoff advice. He has already paid off about $10,000 in credit card debt by cutting his spending, and is paying considerably more than the monthly minimums. That’s great progress. But, unfortunately, he still owes a little more than $15,000 across three credit cards. Worse, he recently learned about another $11,000 on a fourth credit card account that has been transferred to a collections agency. He’s considering debt settlement and is particularly anxious about the newly discovered account in collections. This account was a retail cobranded card. A.R. says the account got lost in the shuffle because a different card issuer acquired the portfolio. Plus, he moved twice and completely forgot about the account. It recently turned up on his credit report during an apartment rental application. The account has been dormant since 2016, and A.R. lives in California, where the statute of limitations on credit card debt is just four years. While I feel borderline unethical suggesting this, and I cautioned A.R. that I’m not a lawyer, I believe he does not need to pay this amount since the has expired.

I m normally a big believer in paying off your debts

I don’t like agencies that encourage consumers to stop paying their bills for a while, to use them as leverage to try and negotiate a lower payoff amount. In my view, that trashes your credit either way. The tactic might not work, but even if it does, you’ve accumulated many late payments and an additional blemish on your credit reports for settling for less than you owed. But I’m also practical; $11,000 is a lot of money, and A.R. is already struggling under the weight of another $15,000 in credit card debt. The credit score damage from the account in collections is almost gone at this point since for up to seven years (but the damage is most significant in the first two years). And since his odds of being sued are very low due to the statute of limitations having expired, I can’t think of any practical reason why A.R. should pay this off. Even if he tried, it would take a long time and would detract from his other debt payoff efforts. Making even one single payment would risk restarting the clock on the statute of limitations. I think what’s done is done in this case. He should leave that account alone, and focus on paying down the three active accounts.

Credit card debt payoff strategies

Often, I suggest a 0 percent to people who find themselves overwhelmed by credit card debt. However, I don’t think A.R. is a great candidate. He probably wouldn’t be able to qualify for a credit limit that’s nearly high enough to transfer the entire balance. Plus, the allow cardholders to pause the interest clock for up to 21 months. That’s a great offer for someone with a smaller balance, but he’ll probably need more than 21 months to pay off the $15,000. I think a better approach would be to engage with a reputable nonprofit counseling agency such as Money Management International. They often enroll clients in with interest rates around 6 percent for about four years. A depicted on the agency’s website is pretty close to A.R.’s situation. In this example, someone with $18,150 in credit card debt could pay it off in four years at a total cost of $21,828 (the original amount plus $2,445 in interest and $1,233 in fees). That sure beats the alternative scenario that Money Management International lists, which is $18,150 at 27.77 percent with only minimum payments. That math is brutal: It works out to a total cost of $58,723 over nearly 30 years. It reflects what someone with a low credit score might be charged by a credit card issuer. At the (17.13 percent), it would take more than 26 years and a total of $42,749 to knock out that debt if you’re only making minimum payments. Clearly, in addition to strategies that can lower your interest rate — such as a 0 percent balance transfer card, a debt management plan offered by a nonprofit credit counseling agency or a — it’s important to pay way more than the minimum if you can. Taking on a , selling stuff you don’t need or cutting your expenses would help too.

The bottom line

If you have credit card debt — and about half of active cardholders do, — it’s critical to prioritize your interest rate. Forget about rewards for now and focus on obtaining the lowest interest rate you can get for the longest amount of time. Have a question about credit cards? E-mail me at [email protected] and I’d be happy to help. SHARE: Ted Rossman is a senior industry analyst at Bankrate.com. He focuses on the credit card industry and helps consumers maximize rewards, get out of debt and improve their credit scores. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer.

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