Finance

How to Get Rid of Revolving Credit Debt: 4 Ways

By Meela Imperato

What is revolving debt? When comparing revolving debt vs installment debt, you have to first know what revolving credit is. Revolving credit—like credit cards or lines of credit—offers convenient ways to access extra cash when you need it, but you could fall into revolving debt—money you owe on your revolving credit account. Successfully managing your credit means knowing how to get rid of revolving credit debt when your balances start to climb toward your credit limit. 

Are you feeling bowled over by revolving credit debt? Here are four ways to get rid of it.

#1 Make Overpayments

One of the surest ways to tackle revolving credit debt is to pay more than the minimum payment amount that’s due each month. By doing so, you can bring your debt down faster in two key ways:

  • Make bigger dents in your balance – This may be obvious, but making overpayments allows you to pay off larger chunks of your debt than sticking to the minimum. 
  • Avoid accruing high interest amounts – It’s important to keep in mind that whatever balance you carry over from month to month accrues interest at a rate that’s stipulated in your agreement. Interest rates vary, but the current average for credit card interest rates is nearly 15%.1 Understandably, that can add up pretty quickly. 

In other words, if you’re wondering how to get rid of revolving credit debt, you could try paying the minimum payment plus an amount that’s equal to a little more than the interest rate. You get bonus points if your payment history doesn’t reflect any late payments.

#2 Be Wise About Using Credit

At the same time as you’re making overpayments, you’ll make greater strides toward banishing your debt by limiting the amount of credit you use each month. 

To maintain healthy credit, you should aim to use no more than 10% of your available credit each period.2 This helps keep your balance low and your credit score high.  

One trick here is to pull out cash for necessary purchases. By seeing exactly where your money is spent each month, you’ll gain a better idea of when and when not to swipe the credit card.

#3 Consolidate Your Debt 

Debt consolidation is when an individual borrows funds that they then use to pay off other debt in full. In most cases, that means securing a personal loan. 

Consolidating debt makes sense, especially if you owe money to many different lenders or if your lines of credit are subject to particularly high interest rates.3 And although it may seem counterintuitive to tackle your debt by adding to it, consider the following benefits of consolidation loans: 

  • Lower interest rate
  • Fewer payments each month

#4 Opt for a Sale-Leaseback Transaction

Homeowners who are wondering how to get rid of revolving credit debt have another option: a sale-leaseback transaction. What is a sale-leaseback? That’s when you sell your house but continue to live in it as a renter. 

How can a sale-leaseback transaction help you manage your revolving credit debt? It’s simple.

When you choose a sale-leaseback program, you unlock a quick and simple way to convert your equity into funds you can use to pay off your debt—all without the steep interest rates or unmanageable monthly payments. With this unique solution, you get a fair price for your home and the freedom to continue living there as a renter. 

How Long Does Revolving Credit Stay On Your Credit Report?

It’s no secret that the debt you carry can influence your credit score. But how long does revolving credit stay on your credit report?

The answer depends. It’s important to understand that revolving credit doesn’t have just one effect on your credit report but multiple effects. Your credit can impact your credit report in the following ways:

  • Available credit
  • Negative accounts
  • Payment history 

Your available credit impacts your credit report and causes minor fluctuations from month to month. But late payments, negative accounts, and credit accounts that get sent to collections can mar your credit report for up to seven years.

How Much Revolving Debt is Too Much?

It’s hard to say in absolute terms how much debt is too much debt. Factors like income, credit history, and more all need to be considered. But in general, it’s best to keep your overall credit utilization ratio below 30% of your total available credit.5

Key Takeaways

  • Ideas for getting rid of debt on revolving credit accounts include making overpayments, limiting credit use, consolidating your debt, or using a sale-leaseback option.
  • Revolving credit debt can stay on your credit report for up to seven years
  • You should keep your credit utilization rate below 30%. 

Sources: 

  1. MoneyGeek. Average Credit Card Interest Rates. https://www.moneygeek.com/credit-cards/analysis/average-credit-card-interest-rates/#
  2. CNBC. Credit utilization is at its lowest since 2009—this is how much the average person uses. https://www.cnbc.com/select/how-much-to-spend-on-a-credit-card/#
  3. Bankrate. How to consolidate debt without hurting your credit. https://www.bankrate.com/personal-finance/debt/how-to-consolidate-debt-without-hurting-credit/ 
  4. Equifax. How Long Does Information Stay On My Equifax Credit Report? https://www.equifax.com/personal/education/credit/report/how-long-does-information-stay-on-credit-report/ 
  5. Forbes. How Much Credit Card Debt Is Too Much? https://www.forbes.com/advisor/credit-cards/how-much-credit-card-debt-is-too-much/ 
Topics:
Credit Card
Debt Management
Written by Meela Imperato
Senior Director of Brand and Content, Real Estate & Finance Journalist
Disclaimer

This article is published for educational and informational purposes only. This article is not offered as advice and should not be relied on as such. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process. EasyKnock is not a debt collector, a collection agency, nor a credit counseling service company.