There are smart ways to pay credit card debt, and than there are not so smart ways. When paying credit card debt, it is important to stick to ways that will benefit the customer. Here are some methods to avoid when trying to pay down your credit card debt –

1.    Never borrow from your 401K to pay back the loan. When you borrow from your 401K to repay credit card debt, you are not able to contribute any funds until the amount has been repaid. You lose income because you must repay the loan and if you lose your job, the money must be paid back immediately to avoid penalties.

2.    Don’t pay unsecured debt, with secured debt such as a second mortgage or home equity loan. Your credit rating has more than likely decreased because of the high levels of credit card debt, and therefore a secured loan may seem like the only answer – but it is not a good idea. You could also stand to lose your home.

3.    Don’t use debt settlement companies. Did you know that when you negotiate with debt settlement companies, payments to your creditors are stopped? This is very bad for the credit rating and could affect your credit score for up to seven years! Negative credit report entries come from this lack of payments and often money is still owed after the process has been completed.

4.    Unless you intend to pay off balances before the introductory period is over, don’t use balance transfers to pay credit cards. Did you know that missing one payment could mean that the interest rate will increase, even if you are late on one monthly payment – it could negatively affect the interest rate on the account, increasing it upwards of twenty percent?

5.    Beware of consolidation loans, these sometimes come with high interest. Most often, these lower monthly payments are created by extending the payment term – rather than lowering the interest rate substantially. These loans are often spread over the course of ten to twenty years and a strict repayment plan would be more effective in most situations.

As we have said, there are good ways to repay credit card debt, and there are bad ways. Avoid these methods when paying credit card debt – and use strict budgets and a regular repayment plan while negotiating with creditors to eliminate existing debt.

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