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In 2008, average household credit card debt was about $10,600. Recent reports indicate that Americans owe about $2000 less today, but growing credit restrictions, including cutting credit lines for existing customers and refusing credit to new applicants, is contributing to this trend. Contributing to the controversy over credit cards is recent federal regulatory legislation highlighting questionable practices of the credit card industry.

Fed Up with Credit Card Debt: Cut up Cards, but Don’t Close Accounts

Effective debt management includes three steps:

• Determine where you stand and set goals for improvement
• Develop a plan to eliminate debt
• Follow your plan and stay on track until you meet your goals

If you’re frustrated and fed up with the high cost of carrying credit card debt, it’s important to stop using your credit cards until your balances are paid off, but it’s equally important not to close your accounts:

• Reducing available credit lines: Your credit scores are partially based on the amount of available credit lines you have. Let’s say that you have a $10,000 balance on a $25,000 car loan, and six credit cards with credit lines totaling $75,000. If you reduce your total available credit to $25,000 (the high credit on your car loan) by closing your credit card accounts, your credit score decreases. Closing one or two cards out of several won’t matter much, but closing all of your credit cards can cause credit problems.
• Purchase protection benefits: Purchases made with major credit cards carry purchase protection; if an item purchased with your major credit card is lost, stolen, never shipped, or damaged within specific guidelines, it can be repaired or replaced free of charge. Purchases on debit cards, even those with major credit card logos, are not eligible for this benefit.
• Protection from vendor bankruptcy: If you make a purchase from a vendor that files bankruptcy, you can file a claim with your credit card company for merchandise not received. If you paid with a debit card, you have to file a claim with the bankruptcy court, which can take several months. In the meantime, you’ve paid for your purchase, and don’t have the merchandise or the funds you used to pay for it.
• Using credit helps maintain higher credit scores: Using debit cards does not affect your credit scores, but not having any active credit cards lowers your credit score. Using credit cards and paying off the balances each month establishes a record of responsible use and repayment.

In some cases, closing your credit card accounts may be necessary to regain financial solvency. Debt consolidation and credit counseling services typically require closing credit card accounts as a condition of negotiating affordable repayment options with credit card companies.

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Think you don’t have what it takes to knock out that credit card debt once and for all? Sure you do. You just need to know which debt reduction strategies can get real results. But you also have to choose to make a change to get help with debt and improve your situation.

Debt Reduction Strategies

There are a lot of companies out there that offer debt management and debt settlement services. But in many cases the services of these companies are not necessary for credit debt relief.

Committing to a debt reduction plan that involves cutting out unnecessary spending and living a bare bones existence for a while may do more for your situation than paying a third party to manage or settle your debt.

Be Willing to Change

Choose to pick a debt reduction strategy that you are willing to stick with for the long haul. Review that strategy from time to time to determine if you are getting the desired results. If things aren’t going as planned, be flexible enough to try something else instead of giving up on paying off credit card debt.

Debt Help from a Counselor

It can be overwhelming to begin a debt reduction plan on your own. Debt counseling can help examine your money habits to get at the root of your debt problems. Debt counseling also gives you a support system at times you might feel like get discouraged about ever paying off your bills. Look for a counselor who offers services free or for a low fee.

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