Recently, the siren song of credit cards is annoying. When it comes time to pay the bills, we Americans are reaching for plastic more than ever.
With more people using credit cards to pay for food and rent, total American credit card debt will hit a record $930 billion by the end of 2022. According to a new report from TransunionThis is a phenomenal growth of 18.5% compared to the previous year.
(I’ve seen headlines in the past about $1 trillion in total American credit card debt, but apparently Transunion does the math differently. Transunion believes this is a record.) In any event, credit card debt has increased significantly.)
Not only that, but the average credit card balance increased to $5,805, TransUnion said.
This comes at a time when credit card interest rates are rising rapidly making card swipes more expensive than ever. The average APR for credit cards is over 19%, the highest ever ! It is the most expensive kind of debt you can have.
Here are some good ideas for what you can do to reduce your credit card debt.
Bigger changes may be needed
Hey, we all have credit card debt. No shame. we’ve all been through it.
But if you’re using your credit card to buy groceries or pay rent, that’s clearly a problem. it’s not sustainable. It may be time to make some significant changes.
- Look for cheap bargains. Easier said than done.
- Shop at cheap supermarkets. When we went looking for the cheapest groceries, we found that Aldi was even cheaper than Walmart.
- make a meal plan Eat healthy and save money. Here’s a guide on how to start planning your meals so you can actually stick to it.
- Get a side gig. This is Penny Hodor’s continually updated page on work from home jobs.
5 ways to get rid of credit card debt
Here’s the ultimate guide to paying off credit card debt. Here we summarize the five methods.
1. Debt Avalanche
Pay off the credit card with the highest interest rate first. Doing so will save you a lot of money over time as you will pay less interest. Learn more about the Debt Avalanche Act here.
2. Debt Snowball
Pay the credit card with the lowest balance first. This will help you get rid of your credit card balance faster and increase your motivation to keep going.
3. Balance transfer
If you have good to excellent credit (usually a FICO score of 670 or higher) and can pay off your debt in less than a year, a balance transfer credit card is for you. With direct debit credit cards, you can save on interest fees by transferring the balance of a card with a high interest rate to a card with a 0% interest rate. Most of these cards offer 0% interest for 12-18 months with no annual fee.
Do you think a balance transfer card is the right move for your finances? We’ve put together a list of the best balance transfer cards available today.
4. Take out a loan
You may consider taking out a loan to consolidate and refinance your debt. Taking out a loan at a lower interest rate and paying off your credit card could save you thousands of dollars in interest at that lower interest rate.
This is a viable option if you currently have little or no funds to pay off your credit card debt. You can also consider personal loans and home equity loans.
Here is a step-by-step guide to getting a personal loan. Here is a guide to home equity loans and home equity credit lines.
5. Debt Consolidation
The world of debt collection and creditors can be confusing. If you’re being harassed by a creditor, don’t give up before finding options for help.
Debt management program: With a debt management program, a credit counseling firm will handle your consolidation in hopes of getting you a better interest rate and lower fees.
If you owe at least $10,000 in unsecured debt, the company national debt relief Create a custom plan just for you. They will negotiate with your creditors to reduce the amount you owe.
Settlement of credit card debt: If the period of financial instability is not temporary and you cannot afford to pay off your credit card debt, debt consolidation is an option, but we consider it a last resort before bankruptcy.
Most people seek the help of a debt consolidation company to do this. Debt consolidation reduces your debt, but it also significantly lowers your credit score and negatively affects your credit report.
For more on these options, check out our ultimate guide to paying off credit card debt.
A final note: Be careful when asking for debt consolidation help. Some companies legally help you, while others take your money and do little to help your situation.
Mike Brasfield ([email protected]) is a Senior Writer for The Penny Hoarder. He knows about credit card debt from his personal experience.