How to Pay Off Expensive Credit Card Debts Now

The normally expensive credit card debt burden is The ever-increasing US central banking system, the federal government, continues to raise interest rates,high inflation 

federal governmentRecently, interest rates have been raised by 75 basis points, indicating that credit debt will soon be burdened as borrowing becomes more expensive and credit card providers are expected to raise annual interest rates. Increasing al Percentage Rate (APR) —The amount that the interest cardholder pays for the outstanding balance each month. 

The average interest rate on credit cards today is only 17% and is expected to rise. According to the CreditCards.com report, the national average credit card APR is well above 17% if most card companies match the Fed's latest three-quarter point rate hike. It may exceed. If the Federal Reserve continues to raise interest rates, these rates could rise further, saying it could. 

"Credit card debt will increase in the coming months," said Lending Tree's credit card analyst. Matt Schulze said. , Online loan marketplace. "When the Fed raises interest rates, it raises interest rates on virtually everyone's credit cards, so it's very important to withdraw credit card debt right now."

Americans have a lot of credit I have a card debt. According to the NY Fed, card balances in the first quarter of 2022 fell by $ 15 billion in line with seasonal trends, but were $ 84.1 billion, but still better than the same period last year. That's $ 71 billion more. On average, cardholders have $ 6,569 worth of credit card debt, according to LendingTree. 

Here are five best ways to get out of balance.

Avoid tight purchases

First, put a tight purchase on your credit card and stop adding it to your principal. 

"You may want to use a credit card to close the gap between your expenses and your income, but you have to pay it off and compared to other types. If interest rates are high, it can pile up, said Corey Stone, a former payment executive and assistant director of the Consumer Finance Bureau: 

This summer If you can't afford to take a vacation, skip the vacation. Payment experts will advise. 

Credit card rates are for mortgages, student loans and car loans. It's important to work on unpaid credit card debt first because it's higher than 

"Maybe contributing to your savings plan, especially when returns aren't high but interest rates are high. Will refrain from doing so, "said Stone. 

Snowball and Avalanche 

Two common approaches to paying off overdue credit card balances are the so-called snowball and avalanche methods. I have. 

Taking a snowball approach means sorting out all your debt by amount, not by the interest rate you are paying for it. 

"You'll spend money on it because you'll get a small win right away," said Nick Meyer, a certified financial planner who shares personal financial knowledge at TikTok. .. "Then you move on to the next one until all of your debt is paid off."

If you use the avalanche method that Meyer said is financially wise, at interest rates Classify debt, rank it from highest to lowest, and repay the debt that is most expensive to execute first. 

According to Meyer, this method can be psychologically difficult and even discouraging. This is because it can take several months for a high interest rate debt balance to be repaid. 

Request a low interest rate from the card issuer

You can contact the credit issuer and ask if you want to lower the interest rate. 

Most people think that there is no room that moves in small increments with a fee, but this is not always the case. 

Get closer to your lender with a repayment plan that you know you can meet. 

"Many lenders are open to coming up with payment plans for you that customers don't know. Be proactive and ask for a specific payment plan," said the young. Kristy Kim, co-founder and CEO of Tomo Credit, a new credit card company for people without credit scores, such as adults and immigrants, said. 

"If the lender disagrees with the payment plan, or if the APR is too high to start from the beginning, you may find a product that can consolidate the debt in one place with a lower APR. You can, "Kim added. 

Lending Tree Schulz said that few people ask lenders to lower interest rates, but the majority of cardholders seeking interest rate cuts have been successful.

Transfer your balance to a 0% APR card

Consumers consolidate their credit card debt and put it all into a new card that offers customers a 0% APR promotion rate. You can transfer it. 

"This may be a temporary solution, but it may be a long-term solution. Customers use products that are essentially safer for them. You need to think about how, and your customers will be mentally trained in their management. Low-risk personal finance. " 

For example, the Wells Fargo Reflect credit card provides new customers with 0% referral APR for up to 21 months. This effectively allows people to continue to pay off their debt while stopping the increase in debt. 

"This can save you hundreds or even thousands of dollars, depending on how much you're borrowing," said BankRate.com's senior credit card. Analyst Ted Rothman said.

Divide the total amount you owe by the number of months of the interest-free period and stick to paying the set amount each month. Please note that you may be charged a 3% -5% transfer fee in advance, as Rothman said it was "still well worth it". 

"If you do it right and don't put new purchases on your card, it's a great way to save money. New loans basically pay off old loans at a much lower rate. I will. "He added. 

Take advantage of low interest personal loans

Low interest personal loans are another way to consolidate your debt and repay it at a lower cost.  

Interest rates will not be zero, but can be as low as 6%, compared to the approximately 17% APR carried by most credit cards. 

Personal loans allow you to combine different types of debt, such as credit card debt, medical debt, and car debt, into a single product for lower monthly repayments. increase. According to Rothman, loan terms are generally favorable and can result in low interest rates that are fixed for up to 5 years. 

Of course, succumbing to spending and finding additional sources of income will bring in more money than you spend and allow you to repay your debt faster. Can help you. 

Getting a side hustle, selling unwanted belongings, and reducing expenses all help facilitate your return journey. 

"The basics of more income and less spending can be applied in parallel with some of these other strategies," Rothman said.