Pay off Credit Card Debt: Paying off credit card debt can be a challenging task, but it is an important step toward achieving financial stability. Anyone with debt knows it can cast a long shadow over household finances.
Credit card debt in particular is rising at its fastest clip in more than 20 years as Americans owe a record $986 billion on their credit cards, a 14.7% increase from a year ago, according to a new report from the Federal Reserve Bank of New York.
As the Fed continues to raise interest rates to contain inflation, credit card holders feel the pinch of higher borrowing costs. Average credit card rates, at 19.9%, are at their highest level in 30 years and could continue to rise, according to Bankrate.
For many, the result is a feeling of increasing despair as their debt burdens and interest rates surge simultaneously. “I feel set up for failure,” says Kim Hollinger, a 46-year-old school teacher in Kernville, Calif., whose sole credit card is maxed out at $5,000 with a 29.7% interest rate.
Besides rent and utilities, most of her expenses are for food and other groceries. She says prices are “incredibly high” at her local grocery store, located about an hour away from the nearest city, Bakersfield.
“When I called the [credit card] company to speak with a representative about lowering my rate so that I could work to pay off my credit card, the response was we’re not doing that right now.
I am not able to increase the loan amount, or get another loan, or even apply for a home loan because I have $80k in student debt from the credentialing program.”
Here are some steps you can take to pay off your credit card debt:
One of the most practical ways to get rid of debt, experts say, is to move your balance from a high-rate credit card to one with a no-interest or low-interest balance transfer offer to reduce the amount of interest you’re paying.
Bank of America, Wells Fargo, and Citi each offer cards that have 0% balance transfer terms lasting as long as 21 months, though there remains a 3 to 5% upfront transfer fee.
- Create a budget: Make a budget that includes all of your monthly expenses, including minimum credit card payments. This will help you to determine how much money you can allocate towards paying off your debt.
- Prioritize your debts: Identify the credit cards with the highest interest rates and prioritize paying them off first. This will help you save money in the long run.
- Negotiate with your credit card company: If you are having difficulty making your payments, consider contacting your credit card company to see if they can offer you a lower interest rate or a payment plan that fits your budget.
- Consider a balance transfer: Look for credit cards that offer a balance transfer option with a lower interest rate. This can help you save money on interest and pay off your debt faster.
- Increase your income: Consider ways to increase your income, such as taking on a side job or selling unwanted items. This can help you pay off your debt more quickly.
- Cut your expenses: Look for ways to reduce your costs, such as eating out less or canceling subscription services. This will help you free up more money to put towards paying off your debt.
- Stick to your plan: Once you have a plan in place, it is important to stick to it. Make your payments on time and avoid using your credit cards for unnecessary expenses.
Remember to pay off credit card debt takes time and effort, but it is worth it in the long run. With a little bit of discipline and a solid plan, you can become debt-free and achieve financial freedom.