In credit card debt? There’s a path out

Summary

Life Kit (NPR) – Episode Summary

Title: In credit card debt? There’s a path out
Host: Marielle Segarra
Guests: Yanelli Espinal, John Kiernan, Raquel Villagra, Stacey Vanek Smith, Rita Soledad Fernandez Paulino
Date: October 6, 2025

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Overview

This episode of Life Kit tackles the often overwhelming topic of credit card debt. With nearly half of Americans (46%) carrying a balance from month to month and the average debt hovering around $6,300, host Marielle Segarra breaks down actionable steps to help listeners create a path out of credit card debt. Joined by personal finance experts, she demystifies credit card use, payment strategies, and consumers’ rights if debt ends up in collections.

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Key Discussion Points & Takeaways

1. Credit Cards: Tool or Trap?

(03:14–04:15)

• Many people fear credit cards, perhaps due to personal or family history with debt.
• Credit cards aren’t inherently “good” or “bad”—success hinges on how you use them.
  • “The credit card itself doesn't have any kind of inherent like it's good or it's bad. It's the usage of that card and who's using that card is you.” — Yanelli Espinal (03:46)
• Having at least one credit card in good standing helps build your credit history and improve your credit score, which opens doors to loans and better financial products.

Memorable Quote:

• “Everyone should have a credit card simply because owning the credit cards that's in good standing will send positive information to the credit bureaus which will make your credit report look better and then in turn lead to a better credit score, which helps you save a lot of money and opens a lot of doors for lending.” — John Kiernan (04:16)

2. Minimum Payments: Why They Matter

(05:10–05:59)

• Always pay at least the minimum payment on time to avoid damaging your credit score, incurring late fees, or having your debt sent to collections.
• Setting up automatic payments, even for just the minimum, is smart.

Definition:

• “The smallest amount you're required to pay each month to keep your account in good standing.” — John Kiernan (05:55)

3. Don’t Sacrifice Emergency Savings

(06:44–07:47)

• It’s tempting to throw all cash at debt, but it’s important to prioritize an emergency fund, even if you’re in debt.
• Without savings, any unexpected expense (car breakdown, medical bill) will send you straight back to using credit cards.
• Target: Save enough to cover at least three months of living expenses.

Practical Tip:

• Even $10 per month helps; automate whatever you can.

4. Debt Repayment: Avalanche vs. Snowball

(07:47–09:24)

• Avalanche method: Pay off cards with highest interest rates first (saves money on interest).
• Snowball method: Pay off smallest debts first (provides quick motivation).
  • “You'll get some quick wins and that can feel good for somebody who has a hard time sticking to a long term plan.” — Yanelli Espinal (08:47)
• Make debt payments a predictable line item in your monthly budget.

Example:

• “Maybe you tell yourself I'm going to pay $50 every month for the next 10 months and then I'm going to be debt free in 10 months.” — Yanelli Espinal (09:09)

5. Balance Transfers and Interest Rates

(09:24–09:59)

• Consider transferring your balance to a card with a 0% introductory rate (often for 12–18 months) to reduce the cost of paying down debt.
  • “You can pay that off much quicker and much less of an expense.” — John Kiernan (09:40)
• There’s usually a 3–5% transfer fee, but it’s often worth it if you can pay off the balance during the promo period.

6. Negotiate Your Credit Card Terms

(09:59–12:02)

• Many people don’t realize credit card terms (interest rate, payment due date, minimum payments) can be negotiated.
• Tips for negotiating:
  • Highlight your loyalty and payment history.
  • Reference competitors with lower rates and ask your issuer to match.
  • If your due date is inconvenient, request a change right after your payday.
  • If struggling, ask about hardship programs that may reduce or postpone payments.

Memorable Quote:

• “You can say things like, I've been a really loyal customer for X number of years or I've made all on time payments... What are some options that I have?” — Stacey Vanek Smith (10:34)

7. What If Your Debt Goes to Collections?

(13:46–18:22)

• After 180+ days of no payment, your debt can go to collections or be ‘charged off’ by the creditor.
  • “Charge off is just something on the accounting side of things that the creditor has to do.” — Raquel Villagra (14:13)
• Charge-off doesn’t eliminate your responsibility to repay.
• Debt collectors must provide a debt validation letter within five days of first contact.
• Never discuss debt by phone or give personal information—instead, keep communication in writing to avoid scammers and maintain a paper trail.

Your Rights:

• You can dispute a debt (ask for proof/clarification) within 30 days of contact; the Consumer Financial Protection Bureau (CFPB) provides sample letters.
• You can ask debt collectors to stop contacting you in writing; they’re legally required to comply, though the debt remains.
  • “The cease contact can still be a huge relief for people who just need a pause...” — Raquel Villagra (17:13)
• In some cases, collectors may drop efforts if collection is unlikely, especially if you can demonstrate hardship.

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Notable Quotes & Memorable Moments

• “The way our economy is structured, people take on debt just to pay for basic living expenses.” — Raquel Villagra (05:34)
• “If you take all your cash, pay it off the credit card, it's only a matter of time before you're going to get into debt again.” — Stacey Vanek Smith (06:44)
• “If you don't call them and tell them, they're going to think that you're trying to not pay them and also not let them know. And that's when it takes, you know, a really bad hit to your credit score.” — Yanelli Espinal (11:43)
• “There's so many scammers out there pretending to be collections agents. Debt collectors can be extremely pushy. They might try to pressure you into agreeing to make payments when you don't even really have all of the information in front of you.” — Raquel Villagra (15:41)

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Timeline of Important Segments

| Timestamp | Segment Topic | |------------|----------------------------------------------------| | 00:14 | Intro, prevalence of credit card debt | | 03:14 | Credit card stigma and building wealth | | 05:10 | Importance of minimum monthly payments | | 06:44 | Emergency funds vs. paying debt aggressively | | 07:47 | Avalanche vs. Snowball repayment methods | | 09:24 | Balance transfers and lowering interest rates | | 09:59 | Negotiating rates and terms with card issuers | | 13:46 | What happens when debt goes to collections | | 14:13 | Charge-offs explained and collection process | | 15:41 | Rights with debt collectors and avoiding scams | | 16:54 | Disputing debts and cease-contact rights | | 17:52 | Negotiating with collectors/hardship strategies | | 18:22 | Recap of five takeaways |

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Five Essential Takeaways (19:19)

1. You don’t need to avoid credit cards forever. They can build credit if used wisely.
2. Build an emergency fund, even if you’re in debt. Savings keeps you from repeating the debt cycle.
3. Create a debt repayment plan based on your interest rates.
4. Credit card terms can be negotiated—don’t be afraid to ask.
5. If your debt ends up in collections, you have legal rights.

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Episode Tone

Supportive, reassuring, and practical—focused on actionable advice and demystifying the stigma around debt.

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For More Help

Sign up for Life Kit’s Credit Card Debt newsletter at npr.org/creditcarddebt for a step-by-step guide, calculators, and planning tools.

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Host: Marielle Segarra
Producer credits omitted per request (see transcript for full credits if interested).

Transcript

[Podcast Sponsor Announcer]

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[Marielle Segarra]

You're listening to Life Kit from NPR. Hey, it's Marielle. Okay, raise your hand if you have credit card debt. If we were in a room together, I'd guess about half the hands would go up. According to a 2025 Bank Rate survey, about 46% of respondents were carrying a balance on a credit card from month to month. So it's common, right? The credit bureau TransUnion puts the average credit card balance at about $6,300. That can feel like a lot to get out from under, especially if your budget is already tight. And then if you're paying 20% interest or higher, that's common for credit. That pile of debt just grows and grows. But there is a path out of credit card debt and on this episode of Life Kit, I'm going to share five takeaways that will help you find that path. We'll talk about how to use credit cards to your advantage, how to negotiate with your card issuer and get on a payment schedule you can actually follow, and what to do if your debt ends up in collections. Also, I want to say Life Kit just launched a newsletter series on this topic. It is packed with information and will give you a step by step plan so you can crunch the numbers, map out your payments and ultimately stay off the hamster wheel of credit card debt. You can sign [e-mail] creditcard debt this.

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[Marielle Segarra]

To start with the elephant in the room. You may think, or you may have been told that it's a bad idea to have a credit card. Maybe you grew up in a family that struggled with debt, or maybe you just don't know if you can trust yourself to keep your spending under control when you've got that tempting piece of plastic in hand. But credit cards can be an incredible tool and they can help you build wealth if you use them the right way.

[Yanelli Espinal]

And they can also be very damaging when used poorly.

[Marielle Segarra]

Yanelli Espinal is a financial educator and the author of Mind you'd Money.

[Yanelli Espinal]

The credit card itself doesn't have any kind of inherent like it's good or it's bad. It's the usage of that card and who's using that card is you. So it's all on you to use it correctly in a way that is going to help you financially in the long run.

[Marielle Segarra]

So takeaway one. You don't need to avoid credit cards forever. In fact, it's ideal to have at least one credit card in good standing. John Kiernan is the managing editor of the personal finance website WalletHub.

[John Kiernan]

Everyone should have a credit card simply because owning the credit cards that's in good standing will send positive information to the credit bureaus which will make your credit report look better and then in turn lead to a better credit score, which helps you save a lot of money and opens a lot of doors for lending.

[Marielle Segarra]

As a reminder, your credit score is like a financial version of a report card or gpa. And if at some point you want to borrow money to buy a car or a house or to start a business, you're going to need to show your credit score and your credit history. A credit card helps you build that and so ultimately build wealth. Like Yanelli said, though, there's a way to use credit cards to your benefit and a way to use them that'll leave you stuck in a debt hole. So here's the ideal scenario. You want to pay off your full credit card statement balance every month. That's a readout of what you spent in a one month period at the time your billing cycle closed.

[John Kiernan]

That is the full amount that you need to pay by the due date if you want to avoid interest charges.

[Marielle Segarra]

If you don't pay that amount by the due date, that's known as carrying a balance on your credit card. Now, we understand a lot of folks carry a balance out of necessity. Credit cards have become a lifeline for them. Raquel Villagra is an attorney at the New Economy Project, a nonprofit in New York City that works with people who are not making a living wage.

[Raquel Villagra]

The way our economy is structured, people take on debt just to pay for basic living expenses.

[Marielle Segarra]

Whatever the reason, if you are carrying a balance on a credit card, you can come up with a debt payment plan and we'll get to that. But the other thing you want to do in the meantime, if you can, you should always make your credit card's minimum payments.

[John Kiernan]

The smallest amount you're required to pay each month to keep your account in good standing.

[Marielle Segarra]

The minimum payment can be a fixed dollar amount, maybe $25, or a small percentage, like 2% of the total you owe. If you don't pay this amount, that will hurt your credit score. You'll also be charged late fees and your debt could be sent to collections. So make this a priority. You can set up automatic payments for just the minimum amount so you don't forget. Okay, our next takeaway is about paying back your credit card debt. When you have a lot of debt that you want to get off your back, your instinct might be to use all the money you have to pay it off. Rita Soledad Fernandez Paulino is the CEO of Wealth Paratodos, and she says this is unfortunately a mistake. So if you take all your cash, pay it off the credit card, it's.

[Stacey Vanek Smith]

Only a matter of time before you're.

[Marielle Segarra]

Going to get into debt again. Think about it. If you don't have savings the next time your car breaks down or your computer dies or you get sick, you're going to put that expense on a credit card. So takeaway two is to build an emergency fund. Even. Even if you have existing credit card debt. An emergency fund is meant for unexpected expenses like your tires go out, you.

[Stacey Vanek Smith]

Have a family member who needs a flight to go back home.

[Marielle Segarra]

You can also use the money from this fund if you lose a job to tide you over until you find a new one. One target financial planners often give is that you should have enough money in your account to survive for at least three months. To figure that out, calculate your monthly expenses, including rent and food and debt payments.

[Stacey Vanek Smith]

Add that total up, and let's say that it's $2,000. Then you want to save at least three months of $2,000, which would be $6,000. That's like the minimum amount that you should have saved for unexpected expenses.

[Marielle Segarra]

Again, I want to acknowledge this is not easy for a lot of folks. Only 55% of respondents to a Federal Reserve survey said they had three months of emergency savings. But but this is something to aim for. One thing that could help here. While you're looking at your expenses, also look at your income. Is there anything left over every month? Even $10? Set aside what you can. Okay. Takeaway. 3. It helps to come up with a debt payment plan considering the interest rates of your credit cards There are two common approaches to paying off credit card debt. The avalanche method and the snowball method. The avalanche method means that you pay off the card with the highest interest rate first. If you do this, you'll save money on interest over time. So if you have one credit card with a 17% interest rate and another with a 25% interest rate, you would start by paying the 25% card with the snowball method. On the other hand, you pay off the card with the least money on it first.

[Yanelli Espinal]

You'll get some quick wins and that can feel good for somebody who has a hard time sticking to a long term plan.

[Marielle Segarra]

This is a better approach if your credit cards have similar interest rates, so using the avalanche method wouldn't really make a difference. Next, you're going to decide how much you can put toward your credit card debt each month and make that payment a part of your budget. Yaneli says. Maybe you tell yourself I'm going to.

[Yanelli Espinal]

Pay $50 every month for the next 10 months and then I'm going to be debt free in 10 months. And that's going to be incorporated into one of the categories in your budget is pay back my loan $50 every month and you'll put that in for the next 10 months.

[Marielle Segarra]

One other tip on creating a debt payment plan is to try a balance transfer. That's when you roll over your debt to another credit card with a 0% interest rate for some period of time. Could be a year, a year and a half, so that you're just paying the amount you already owe and you.

[John Kiernan]

Can pay that off much quicker and much less of an expense.

[Marielle Segarra]

These cards will usually charge a one time balance transfer fee of 3 to 5% of your total balance, but this is still a good deal if you pay off the debt within the 0% interest period. If you can't find a deal like this, you could look for a card with a lower interest rate than your current one and pay off your high interest card with that new lower interest card, you'll still owe that $500 or whatever it is, but you'll be paying less in interest. Speaking of interest rates, did you know that yours are not set in stone? That's our takeaway. 4. Your credit card terms, including the interest rate, the due date, and the monthly payments, are often negotiable. Let's walk through a few scenarios. Say you have a balance on your credit card. You can actually call your card issuer and ask them to lower your interest rate. I talked to financial journalist Stacey Vanek Smith about this.

[Stacey Vanek Smith]

You can say things like, I've been a really loyal customer for X number of years or I've made all on time payments or I'm trying to get my credit in order. Like, I'd love to continue being your customer and you know, I'd love for this relationship to continue. What are some options that I have? Find out what's possible first.

[Marielle Segarra]

If they say no, look around for other credit cards that offer lower rates.

[Stacey Vanek Smith]

But if you find a card that has a lower interest rate, you can call the card that you have and say, listen, I found this competitor. They're willing to offer me a credit card for X percent. I'd love to stick with you guys. Can you match it?

[Marielle Segarra]

Okay, another scenario. You find that your credit card due date is at an inconvenient time of the month, maybe because you have a lot of other bills due. Then you can call the credit card company and ask them to change the date to something that's better for you, like right after you get paid. All right, a third scenario. You're having trouble making your monthly credit card payments. Yaneli says call your card issuer.

[Yanelli Espinal]

If the payment due date is coming up and you don't have the money, call them. Pick up the phone and call the phone number on the back of your credit card.

[Marielle Segarra]

Explain your situation that your payment due date is coming up and you don't have the money.

[Yanelli Espinal]

Can you help me? Can you either lower the amount I have to pay or can you change the due date a little later so I can, you know, maybe pick up an extra shift and come up with the money in a few weeks. If you don't call them and tell them, they're going to think that you're trying to not pay them and also not let them know. And that's when it takes, you know, a really bad hit to your credit score.

[Marielle Segarra]

Credit cards often have programs for folks who are dealing with financial hardship, ask if they offer a credit card hardship plan. They might lower your monthly payments or allow you to postpone payments for a year. One other point here, if you do miss a minimum payment, you want to get in touch with the card issuer before your debt goes to collections. We'll have more on collections after the break.

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[Marielle Segarra]

Okay, we're back talking about credit card debt takeaway. Five is that if your debt does end up in collections, you have rights. Let's talk about what happens when you stop paying your credit card bills. Once you've missed several minimum payments, usually after 180 days or more, you go into default. Raquel Villagra from the New Economy Project says your lender might write off your debt as a loss, and that's known as a charge off.

[Raquel Villagra]

This is not a process that forgives the debt. We hear from a lot of people about this. It can be a confusing point that they might recognize a debt, but they say oh no, but it was charged off so I don't have to worry about it. But that's not the case. Charge off is just something on the accounting side of things that the creditor has to do.

[Marielle Segarra]

Your lender might also send the debt to collections.

[Raquel Villagra]

So an original creditor like a bank might hire a debt collection agency to help try to collect on the account. And this is where things can get confusing and overwhelming for people because they might start receiving letters from companies they've never heard of about an account that they're not necessarily familiar with, or even if they are familiar with the account, they don't necessarily agree with the amount that's being claimed.

[Marielle Segarra]

Under federal law, the Fair Debt Collection Practices Act, a debt collector must send you a letter called a debt validation letter within five days of their first contact with you. That should say what you owe and who the creditor is, and also state that you have the right to dispute the debt if for some reason you don't get that letter. Another way you might find out about your debt going to collections is if you look over your credit report, which experts recommend you do every year, and you see a debt listed under a company you don't recognize. But let's say you do get a notice or you start getting calls from debt collectors. Raquel says, first of all, don't have conversations with debt collectors over the phone. And especially don't give them any personal information like your Social Security number or your birth date.

[Raquel Villagra]

There's so many scammers out there pretending to be collections agents. Debt collectors can be extremely pushy. They might try to pressure you into agreeing to make payments when you don't even really have all of the information in front of you. And so for that reason, we recommend keeping communications with debt collectors to written communication.

[Marielle Segarra]

When a debt collector reaches out, ask yourself, do you recognize this debt? Is this from a purchase you made or a loan you took out? Have you already paid this debt off?

[Raquel Villagra]

So much of the time people are hearing from debt collectors and they just don't have basic information about what the debt is.

[Marielle Segarra]

Your debt can also end up in collections because of a mistake. You know you already paid that bill or you were never billed for that service. And yet you get a letter from a debt collector if you don't recognize the debt or you think it's inaccurate. The Consumer Financial Protection Bureau recommends that within 30 days, you send a letter to the debt collector asking, asking for more information. 30 days because you have more legal rights within that period. The agency has sample letters you can download on its website, and they're super helpful. Under federal law, you also have the right to dispute a debt with a.

[Raquel Villagra]

Debt collector for any number of reasons, including if you don't recognize the debt, if you disagree with the amount that they're claiming, if you have other bases for disagreeing that you owe the debt.

[Marielle Segarra]

The CFPB has template letters for that, too. Another right you have is to tell a debt collector to stop contacting you.

[Raquel Villagra]

Having a debt collector stop contacting you doesn't make the debt go away. The debt is still out there, but the cease contact can still be a huge relief for people who just need a pause to wade through everything that's going on and, you know, figure out their situation again.

[Marielle Segarra]

Raquel recommends sending the debt collection agency a letter because then you've got a paper trail.

[Raquel Villagra]

And the letter can be as simple as, you know, I'm contacting you about XYZ account and I request that you stop contacting me. They have to honor that request because of the law. They might not. They might violate the law. We have seen that happen. But it is something that they're required to do.

[Marielle Segarra]

Once a debt is in collections, Raquel says you can still try to negotiate it down with the debt collector. And sometimes collectors will give up if they think there's no way they're going to get the money from you.

[Raquel Villagra]

A lot of the people that we work with through our hotline, it's unlikely that your income situation is going to change. And we have seen that people, if they let the debt collector know, the debt collector may make the assessment that this person is not somebody that we can collect from and it's not worth the resources to pursue them.

[Marielle Segarra]

Now, I wouldn't say you want to rely on this happening and ideally your debt never ends up in collections at all. But this is all to say you do have rights when it comes to debt. Like we said at the beginning, we get into credit card debt for all different reasons. We're hoping to give you the tools to get it under control. If you want more help and a deeper dive, we have a detailed guide coming out today in our Credit Card Debt newsletter series that'll give you a step by step plan so you can crunch the numbers, come up with a payment schedule and stay out of credit card debt. You can sign [e-mail] creditcard debt okay, time for a recap. Takeaway one, you don't need to avoid credit cards forever. In fact, it's ideal to have at least one credit card in good standing. Takeaway 2, Build an emergency fund even if you have existing credit card debt. Takeaway three, come up with a debt payment plan considering the interest rates of your credit cards. Takeaway 4, your credit card terms, including the interest rate, the due date and the monthly payments, are often negotiable. And takeaway five, if your debt does end up in collections, you have rights. That's our show. This episode of Life Kit was produced by Claire Marie Schneider and Sylvie Douglas. Our visual our visuals editor is Beck Harlan and our digital editor is Malika Garib. Megan Keane is our senior supervising editor, and Beth Donovan is our executive producer. Our production team also includes Andy Tagle and Margaret Serino. Engineering support comes from Ted Mebane with fact checking by Sarah Knight. I'm Mariel Segarra. Thank you for listening.

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[Marielle Segarra]

Question that no one in your life can help with? Something that makes the people around you go, yikes, What a weird question. Well, freak here on how to do everything, we want to help you out. Each week we get fantastic experts to answer your questions. People like us, Poet laureate Ada Limon, bodybuilder Arnold Schwarzenegger and rapper Rick Ross. Season two just launched. Go listen to how to Do Everything from NPR.