At RISE, we’re celebrating Financial Literacy Month this April by sharing practical ways to improve your financial wellness and build better money habits.

Let’s tackle credit card debt—specifically, why you should never ignore it and what you can do to manage it. After all, it’s a problem many of us face: The experts at NerdWallet estimate that Americans have more than $930 billion in credit card debt, with each household carrying an average balance of almost $16,000.

Why you shouldn’t ignore your credit card debt
People can ignore their credit card debt in a variety of ways. Perhaps you only pay the minimum balance each month, make late payments occasionally or have stopped paying altogether. All these habits fall under the umbrella of ignoring—or not optimally managing—your debt.

Here are four major reasons why you shouldn’t ignore your credit card debt:

  1. Late payments hurt your credit score. After 30 days, the credit card company can report the past due payment to one or more of the major credit bureaus, which results in an entry on your credit report. Since the payment history on your credit report accounts for roughly 35% of your credit score, late payments can have a heavy impact. (Exactly how much your score will be hurt by a late payment depends on your overall credit profile.) The chain reaction doesn’t stop there: Having a low credit score can make it more difficult to get new credit, and any new loans will likely have a higher interest rate. Plus, future property owners and employers who check your credit report may react negatively to a history of late payments.
  2. Your debt could ultimately end up in collections. If your credit card payments are 6 months (180 days) late, the credit card company will likely “charge off” your debt and pass it over to a third-party collections agency. While there are laws that protect consumers from harassment by debt collectors, the experience is generally unpleasant. In fact, if a debt collector has a proper court judgment, then it may even be able to garnish your bank account or wages.


  3. Carrying a balance is expensive. Most credit card companies charge interest on a daily basis, so every day that you carry a balance, it becomes more expensive. Plus, if your payments are late, creditors charge you late fees and can bump up your interest rate to a higher “penalty” rate, making it even more costly to carry a balance.
  4. Your relationships could feel the strain. Arguing about money is a top predictor of divorce. Money issues can also foster feelings of stress, depression and anxiety—none of which are healthy for your relationships with family, friends and partners.

How to manage credit card debt
The consequences above are just the beginning. Instead of ignoring your credit card debt, it’s best to manage it: Address it proactively by formulating a thoughtful plan.

Start here: Make a budget and establish goals
Begin with a budget. Your budget will identify what money is coming in, what money is going out, and where you can adjust. The ultimate goal is to identify extra money that can go toward paying down your credit card debt. Reining in your overspending and adopting a frugal lifestyle are great ways to free up extra cash.

You’ll also want to establish financial goals. Are you aiming to buy a home, save for a child’s tuition, or raise your credit score? Whatever it is, identifying the target can help frame your actions going forward. With a goal on the horizon, making a late credit card payment will no longer be something that “just happens”—you’ll see it as a deviation from your path.

If you struggle to stay organized, you can also consider helpful apps and automatic payments or reminders, which go a long way in proactively managing your debt.

Next step: Start paying down your credit card debt
If your chief goal is pay the smallest amount of interest on your credit card debt, there’s one surefire way to get it done. As we outlined in an earlier post, it’s often called the debt avalanche method.

First, you determine how much you can contribute each month to paying down your credit card debt. Then, rank your credit cards according to interest rate. Your first target will be the card with the highest rate. You’ll make the minimum payments on your other cards and dedicate all extra money toward the balance with the highest interest rate.

You could also try the debt snowball method. In this scenario, your first target will be the card with the lowest balance. Ever extra cent you have will go toward eliminating this balance—while paying the minimum on you rother debts. Your morale will get a boost when you quickly achieve a $0 balance, encouraging you to stay committed to the method. However, you’ll end up paying more in interest compared to the avalanche method.

Whether you’re aiming to minimize interest payments or working to wipe out a small balance ASAP, be sure to pick a method and follow through!

Another option: Debt consolidation loans
If you have multiple credit card balances and/or other debts, you might consider a debt consolidation loan.

This type of installment loan allows you to consolidate multiple debts, including credit cards, medical bills and other types of loans. Installment loans have a set payoff date—ranging from a few months to a few years—and let you make monthly or biweekly payments. Installment loans range from a few hundred to several thousand dollars.


The process starts with a loan application. Lenders examine your credit score and other financial info to determine if you meet their standards, and to establish your interest rate. A better credit history generally translates to a lower annual percentage rate (APR).


After you’re approved for the loan, the lender will either pay off your existing debts for you or disburse cash to you to pay off debts yourself. You’ll now make one fixed, predictable payment for just the installment loan. 


It’s possible to save money—potentially a big chunk—by paying less in interest each month. You’ll have fewer bills, too, making it easier to maintain a singular focus on eliminating your debt. It can also be encouraging to have a firm date on the calendar when you know the debt will be fully paid off. Additionally, an installment loan can help you build credit with on-time payments.


An online loan from RISE can help you take control of your credit card debt and improve your financial wellness: Apply for an online installment loan today. And if you’re striving to build better money habits, RISE is here to help. Check out our free, interactive tools for setting savings goals and managing debt.


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While you may not be able to completely control your finances by simply cruising on autopilot, most of these helpful tricks require minimal effort on your end.