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Everyone has a little bit of debt. Whether student loans, a car loan, or credit card debt, a little debt is common. But how do you know when your credit card debt has gotten out of control? And how do you get out of credit card debt once it has gotten out of control?

Is Your Credit Card Debt Out of Control?

The average American household has $16,140 in credit card debt. But while this may seem manageable, it can be debilitating for some. For some, even a few thousand dollars can feel staggering. Yet others deal with hundreds of thousands of dollars in debt. For example, a law student might graduate with $200,000 of student loan debt, yet feel as if that was a good investment because they know that eventually, once they are fully practicing law, they will be able to recoup that money and pay off their debt.

Still, debt is something that you can’t just throw under the rug and not think about. It factors into a lot of bigger decisions, for example when you’re seeking to buy a home, or take out a line of credit. A bank or lender will look at your debt to income ratio to determine if you are a good candidate for the loan. Even if you have a great credit score, if you have a sizeable amount of debt, a bank or lender might still deem you a “risky” candidate for a loan.

Still, credit card debt can be managed – either through debt consolidation, or in extreme cases – bankruptcy.

But before you make any decisions, you’ll want to establish if your credit card debt has become unmanageable.

Warning Signs

Here are some warning signs that your credit card debt has become unmanageable.

(To note: just having one or two of these is not indicative that your debt has become unmanageable)

One of more of your credit cards is maxed out. Using more than 70% of your available credit could be a sign of trouble. And if you continue to spend you can be hit with over-limit fees, having to pay back a lot in interest, and no safety net (credit wise) when it comes to emergencies. Bottom line: if all of your credit cards are maxed out, you have no other place to pull money from in case of an emergency.

You turn to your credit card for everything. When you use your credit cards for making small purchases – such as for groceries or gas because you don’t have enough money in your bank account to cover these expenses, it can be a sign that you’re over-extended. Using a credit card for groceries or gas in order to get rewards points or air miles, and then paying off your balance in full can be a great move. Might as well make your spending habits work for you! But if your only option of paying for necessities is putting it on your credit card, you may need to find a way to manage your debt.

Debt-to-income ratio is too high. There are general lending practices when it comes to  how much of your income should be used towards paying down debt. A mortgage lender typically wants to see that a mortgage payment does not exceed 28% of your income, and that total debt payments don’t exceed 36%. What this equates to is about 8% of your income should be used to pay off your other debts. If other debt payments (credit cards, student loans, auto loans, etc.) are substantially more than this, it could indicate that you have too much debt. So, for example, if your household income is $5,000 per month, your debt payments (excluding mortgage or rent) should be $400 or less. This is an ideal case. At a maximum, the debt-to-income ratio should be 20% or so.

You can only afford to make minimum payments. When you only make the minimum payments on credit card debt you can be left with years or decades of having to pay down your debt. And with that, the interest you end up paying means that you will need to pay several times the amount of the original purchase. For example, $15,000 of debt at an interest rate of 18% means that at a minimum payment of $250 per month you will be paying for 13 years and end up paying a total of $38,500. You want to try an be able to pay off any new line of credit within six months. For charges made on cards that offer interest free incentives, you’ll want to make sure that you pay off the balance before that interest free time period ends.

You use other credit to make your payments. Using a line of credit, taking a cash advance from another credit card, or borrowing money in order to make credit card payments, is a big warning sign that you are overextended. yes, it’s important to make your payments, but incurring debt to pay off debt can equal a snowball effect that makes your debt larger and larger and your interest larger and larger.

You miss or are late on payments. Everyone misses a payment from time to time. But if you are consistently unable to pay your payments, you might be out of control. Missing payments adds late payment fees and can also increase your APR. Additionally, late payments can damage your credit score for years.

Lying about debt. No one wants to admit they’re in over their head when it comes to debt. But if you find yourself lying to friends or family, it’s probably your debt has become embarrassing to you – to the point that you don’t want to admit the debt to yourself or to other people.

Solutions to Overwhelming Debt

Now that you have established that you might be over your head when it comes to your debt and your ability to pay back your debt, you might be feeling even more overwhelmed. Don’t be! There are options available to you!

Stop spending. This is probably obvious, but you need to get your spending habits under control. Any other piece of advice will not help you if you are wracking up debt as quickly as you are trying to pay it off. It’s time to start a budget when it comes to food and other expenses. You’ll need to be strict until you have your credit card spending under control.

Look for lower rates. Take a look at all of your credit card interest rates. Once you have a list, start calling around and asking the credit card lenders for a lower rate. They won’t always say yes, but it can save you lots of money if they agree to it. You might also mention that you’re experiencing trouble paying it off. Credit card companies are often very willing to help you in order to ensure that you stay a customer with them.

Consider consolidating your credit card debt. A debt consolidation loan from a bank, or a peer-to-peer lender can help you combine all your debts into one place. Taking advantage of a 0% balance transfer offer is also great because many of these offers come with low interest or even no interest for up to a year. This means that all your monthly payments are applied to the principle and not the interest. Once you have all your debts in one place, you can pay them all down with one monthly payment.

Pay off more than just minimums. After you lower your interest rate or consolidate your debt, try to pay down the balance in an aggressive way. Even a small increase from just paying the monthly minimum can save you tons of money on interest. This is especially true if you have consolidated with an interest free credit card. In these instances it’s crucial that you pay down the balance before that interest free time period expires.

Create a repayment plan. Many lenders will work out a repayment plan with you to repay debt. You can also work with a credit counseling service to create a repayment plan. This helps keep you on track, while also providing a light at the end of the tunnel to where you can see yourself being debt free.


If your debt is too high to be consolidated, you might want to consider bankruptcy. A bankruptcy attorney will be able to look at your financial situation and determine if bankruptcy is a viable option for you. They will also evaluate your options for avoiding bankruptcy if other options exist. There are many different ways to discharge your debt and find the financial relief you have been looking for.

Working With a Bankruptcy Attorney to Help Consolidate Debt

At RHM LAW LLP, we will help you explore all of the debt relief options available to you. Though we specialize in bankruptcy law, we do not suggest bankruptcy as an option if we do not think it is the best option for them. We are committed to helping our clients resolve their debt problems, achieving true debt relief and avoiding potential debt consolidation scams. Contact us for a free consultation.

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