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How to Pay off Credit Card Debt with No Money, Bad Credit

Even with minimal funds and poor credit, there are several strategies you can use to kick credit card debt to the curb.

Written by Jerry Brown / September 23, 2022

Quick Bites

  • Focusing on boosting your income and reducing your expenses can help you free up some money to pay off credit card debt.
  • You can use several debt repayment strategies to pay off credit card debt— understanding the pros and cons of each option can help you choose the right one for your situation.
  • If you need help creating a plan to get out of credit card debt, consider reaching out to a certified credit counselor.

Paying off credit card debt with no money and bad credit may feel like an unachievable goal. But it's possible with motivation and planning.

"If you find yourself in this situation, don't fret!” says Jeff Rose, a Certified Financial Professional and founder of Good Financial Cents. “It will take some work, steadfast discipline and patience, but it can be done."

Budgeting can help you locate extra cash to put toward your debt. Or, it might reveal a need to look for ways to boost your income.

Once you’ve freed up some money, you can start tackling your debt with various strategies, such as the debt snowball or avalanche methods. Let’s start with some budgeting tips.

Inside this article

  1. Create a budget
  2. Consider debt repayment options
  3. Grow your income
  4. Ask for financial assistance

Create a budget

A budget can help you free up extra cash to put toward your credit debt. Don't have one? Follow these steps:

  1. Jot down your expenses and income.

  2. Comb through your list of expenses over the past few months and separate them into “needs” or “wants.” 

  3. Separate your expenses into different categories—food and entertainment, for example—and decide on monthly spending limits for each one.

  4. Decide which "wants'' to reduce or eliminate and reallocate those funds toward your credit card debt.

Here are some budgeting tips you can use to get set up and stay on course:

  • Use a budgeting template. If you prefer writing your budget out, consider printing out a template, like the Federal Trade Commission’s (FTC).

  • Use a budgeting app. If you prefer keeping track of your finances digitally, download a budgeting app or use a spreadsheet, such as Microsoft's. Popular apps include Mint, YNAB and Personal Capital.

  • Get a financial accountability partner. Creating a budget is simple, but sticking to one can be difficult. Ask a family member or friend who’s also interested in budgeting to meet with you monthly to track your progress. Your spouse or significant other could be your natural money partner.

Consider these 6 debt repayment strategies

There are several debt repayment strategies you can use to get out of credit card debt with no money. Learning how they work can help you discover which option is right for you. Here are six to consider.

1. Debt snowball method

The debt snowball method requires you to put any extra money you have toward paying off your smallest credit card balance first while making minimum payments on your other cards. 

“The advantage to the debt snowball is the endorphins it generates,” says Herman Thompson, Jr.,  a Certified Financial Professional and Chartered Financial Consultant who works for Innovative Financial Group in Atlanta. “It feels good to pay off debt; you’ve accomplished something. This feeling of accomplishment causes an endorphin rush and builds the behavior of saving.”

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However, the downside, according to Thompson, is that this approach will take longer than the debt avalanche method (see below), and you may end up paying more interest.

2. Debt avalanche method

The debt avalanche method operates similarly to the debt snowball method, but you pay down your highest-interest rate credit card first.

“The debt avalanche is math,” says Thompson. “If you are looking to pay off debt as quickly as possible with as little interest expense as possible, this is the [right] program. It often takes longer to see the first dominoes fall in this method, but once they start falling it really picks up steam.”

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But the method also comes with downsides.

“The biggest problem with this method is that it is tough to wait to start seeing the number of creditors start to diminish,” says Thompson. “The end is sweet, but it doesn’t have the early payoff and behavioral reinforcement of the debt snowball.”

3. Debt management plans

If you need help managing your credit card debt, a certified credit counselor can create a debt management plan (DMP) for you. With a DMP, you make a monthly lump-sum payment to a credit counseling agency. The agency uses those funds to pay your creditors.[1].

A significant advantage of enrolling in a DMP is that an accredited, nonprofit credit agency may be able to negotiate lower rates and waive fees with your creditors[1]. With this plan, you typically pay off credit card debt in three to five years.

In addition, DMPs offer the simplicity of a single monthly payment, which could be welcomed if you’re behind on a handful of credit card bills.

But there are some cons: You may have to pay a one-time setup fee of $50 and a $25 monthly fee unless you qualify for a hardship waiver. Also, credit counseling agencies will require you to close your credit card and not open any new lines of credit.[1] 

If you think a DMP is the best option, consider contacting Department of Justice-approved counseling agencies in your area. A legitimate counseling agency provides you with free information about its services without requiring you to share any information about your circumstances, according to the FTC.[2]

4. Debt settlement 

Debt settlement involves negotiating with a creditor and making a lump-sum payment that’s less than what you owe.[3] You can do this on your own or hire a debt settlement company or attorney. If successful, this option can help you get rid of credit card debt much faster. 

But there are some huge drawbacks of negotiating a debt settlement. For starters, a credit card company can report the settled account to the three major credit bureaus—Equifax, Experian and TransUnion. As a result, this can damage your credit, and the settled account will show up on your credit report for seven years.[4]

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What’s more, the FTC warns that working with a settlement company can put you in a deeper financial hole.[3] For example, settlement companies typically advise consumers to stop making payments on their credit cards.[3] If you followed this advice, you could end up paying late fees and a higher interest rate. 

Something else to consider is that a debt settlement company charges you a fee for every debt it settles.[3] Plus, you may have to pay income taxes on the forgiven amount.[4]

Still interested in pursuing debt settlement? Try contacting your credit card issuer first to discuss your options.  If you decide to hire a debt settlement company, do thorough research. The FTC recommends contacting your state’s attorney general’s office to see if any complaints have been filed against the company.[3]

5. Debt consolidation

If you’re struggling to keep up with multiple credit card payments, combining your credit card debt into a single account could help. For instance, you can take out a personal loan and use the funds to pay off your credit card balances. 

Consumers commonly use personal loans to consolidate credit card debt since they tend to have lower average rates than credit cards. As of February 2022, the average 24-month personal loan rate was 9.41%, according to the Federal Reserve. By contrast, the average credit card interest rate was 16.17% for accounts assessed interest.[5]

However, if you have bad credit, you’ll likely have a tough time qualifying for a lower interest rate without a cosigner or co-borrower, unless you opt for a secured loan. Plus, some personal loan companies charge origination fees, which are typically deducted from your loan amount.[6]

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Other financial products you can use to consolidate credit card debt include a balance transfer credit card, home equity loan or home equity line of credit (HELOC). But some of these strategies are only accessible to borrowers with good cash-flow and credit.

6. Bankruptcy

If you're experiencing financial hardship and can't afford to repay your credit card debt, filing for bankruptcy, while painstaking, can provide relief. For instance, two common personal bankruptcies—Chapter 7 and Chapter 13—can help you reduce or wipe out your credit card debt.[7-8]

But you should only use this option as a last resort.  Bankruptcies cause major damage to your credit score and can remain on your credit reports for up to 10 years.[9] This can affect your ability to qualify for future loans like mortgages and auto loans.

Another huge disadvantage is that filing for bankruptcy isn’t free. Depending on the type of bankruptcy you file, it can set you back a few hundred dollars to thousands of dollars.[9]

If you believe bankruptcy is your best option, you’ll have to complete a counseling course from a government-approved agency.[10]  

Tip

You can file for bankruptcy without a lawyer, also known as filing “pro se.” But since filing for bankruptcy is a complicated process, it’s not recommended.[11] Consider getting advice from a positively-reviewed bankruptcy attorney. If you can’t afford to hire an attorney, you might be able to find free legal assistance by contacting your local bar association or legal aid organization.

Grow your income

Though increasing your income is easier said than done, it’s possible. You can do this by “earning a promotion at your current job or picking up a side hustle,” says Rose.

 Here are some side hustle ideas to consider:

  • Driving for a rideshare company

  • Freelance writing or creating a blog

  • Beta testing apps and websites

  • Charging electric scooters

  • Dog walking

  • Mystery shopping

  • Teaching English online

Beyond picking up an extra gig or asking your boss for a raise, you could work on mastering an in-demand skill to boost your earning potential.

Consider seeking credit counseling, financial assistance

You can turn to several places for help if you're struggling with credit card debt. And if you're having problems keeping up with your essential monthly expenses (such as housing, utilities and food), you may qualify for financial assistance.

For starters, a certified credit counselor may be able to help you customize a repayment plan that's based on your unique financial circumstances and budget. One way to find a credit counselor in your area is by reaching out to a nonprofit organization like the National Foundation for Credit Counseling (NFFC). 

Nonprofit organizations usually charge a one-time setup fee of $50 or less and around $25 a month for ongoing services, according to the NFFC.[7] And if you’re experiencing financial hardship, an organization may waive all fees.[8] You can also find free or low-cost debt counseling services at religious organizations, credit unions and extension offices.[9]

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How to Get Helpful Financial Advising for Free

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If you're having trouble paying for your food and housing expenses, consider seeking financial assistance. For instance, you can find rental assistance programs in your area by using the Consumer Financial Protection Bureau's Rental Assistance Finder tool. You can also find food and other types of assistance programs by dialing 211.

Article Sources
  1. “Non Profit Debt Management Plans and Programs,” National Foundation for Credit Counseling, https://www.nfcc.org/what-we-offer/debt-management-plans/.
  2. “Choosing a Credit Counselor,” FTC, https://consumer.ftc.gov/articles/choosing-credit-counselor.
  3. “Settling Credit Card Debt,” FTC, https://consumer.ftc.gov/articles/settling-credit-card-debt.
  4. “Topic No. 431 Canceled Debt—Is it Taxable or Not?” IRS, https://www.irs.gov/taxtopics/tc431.
  5. Jim Akin, “Settled Accounts on Your Credit Report,” Experian, Dec. 1, 2021 https://www.experian.com/blogs/ask-experian/settled-account-will-still-appear-on-the-credit-report/.
  6. “Consumer Credit. G-19” Federal Reserve, https://www.federalreserve.gov/releases/g19/current/.
  7. Maureen Rayburn, "What is an Origination Fee on a Personal Loan?" OneMain Financial, Feb. 1, 2022, https://www.onemainfinancial.com/resources/loan-basics/what-is-an-origination-fee-on-a-personal-loan.
  8. Cara O’Neill, “Credit Card Debt in Chapter 7 Bankruptcy,” Nolo, https://www.nolo.com/legal-encyclopedia/credit-card-debt-chapter-7-bankruptcy.html
  9. Rebecca McDowell, “Credit Card Debt in Chapter 13 Bankruptcy,” Nolo, https://www.nolo.com/legal-encyclopedia/credit-card-debt-chapter-13-bankruptcy.html.
  10. “How Long Does Bankruptcy Stay on Your Credit Reports?” Transunion, May 18, 2021, https://www.transunion.com/blog/credit-advice/how-long-does-bankruptcy-stay-on-credit-report.
  11. “Schedule of Fees,” United States Bankruptcy Court, https://www.lamb.uscourts.gov/schedule-fees.
  12. “Filing for Bankruptcy: What to Know,” FTC, https://consumer.ftc.gov/articles/filing-bankruptcy-what-know.
  13. “Filing for Bankruptcy Without an Attorney,” U.S. Courts, https://www.uscourts.gov/services-forms/bankruptcy/filing-without-attorney.
  14. Courtney Nagle, "How to Select the Right Financial Counseling Organization," NFCC, Oct. 24, 2021, https://www.nfcc.org/resources/blog/selecting-the-right-financial-counseling-organization-for-you/.
  15. “Dealing with Debt,” USA.gov, https://www.usa.gov/debt.

About the Authors

Personal finance writer Jerry Brown headshot

Jerry Brown

Jerry Brown was inspired to master personal finance after getting into credit card debt and buying a car he could not afford. Since 2017, he has written and edited consumer-financing content for a variety of publications, including NextAdvisor and Forbes Advisor.

Full bio

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