It’s no secret that credit card debt is growing at an alarming rate. A 2021 study showed that the average American has over $5,000 in credit card debt. With interest rates and inflation rising, it may seem harder than ever to get out of debt. Luckily, there are still things you can do to ensure you get out of debt fast and save thousands of dollars in interest. Here’s what you need to do.
Why is debt getting more expensive?
There are several reasons why debt becomes more expensive. On the one hand, interest rates are on the rise. According to the Wall Street Journal, the average credit card interest rate has hovered around 17% for several years. Now that the Federal Reserve is raising interest rates, financial experts predict that interest rates on credit card balances will also rise. Another reason why debt becomes more expensive is inflation. Over the past few years, prices have risen faster than salaries, which means that the value of your salary is no longer going as far as it used to. When costs rise and wages stagnate, things become more expensive to buy and it becomes easier to get into debt.
What can I do to lower my credit card interest rates?
There are things you can do to lower your credit card interest rates. First and foremost, be sure to use your credit cards responsibly and only for necessary expenses. If you have a high month-to-month balance, creditors will see this as an indication that you are not taking care of your finances and will raise your interest rate accordingly. Second, be proactive in paying off your card balance in full each month. This will reduce the amount of interest you pay and help you save money on interest over time. Finally, be sure to seek credit counseling if you’re struggling to manage your debt and feeling overwhelmed by it. Credit counselors can help you develop a plan to pay off your debt faster and with less interest, and identify potential financial pitfalls that could lead to debt piling up.
How can I avoid paying more interest?
1. Consider using debt consolidation loans. A debt consolidation loan can help you combine multiple credit cards into one low-interest loan. This can lower your overall interest payments and make it easier to pay off your debts.
2. Use 0% APR balance transfer options. Many credit cards offer balance transfer options at 0% APR for a fixed term, which can help lower your interest payments even further. Remember to try to settle your debt before the end of the promotional period.
3. Keep your expenses under control. If you can’t pay off your debt using the methods above, you might want to cut back on your expenses. This will help you save money on interest and make it easier to pay off your debt quickly.
4. Consider refinancing your debt. If you have high interest debt, refinancing may be a good option. This can help you get a lower interest rate and could potentially save you thousands of dollars over the life of your loan.
5. Try to use a debt repayment strategy. One of the main reasons so many people get into debt is because they don’t understand how to create a strategy to pay it off. There are dozens of popular methods for debt repayment plans, such as the Avalanche or Debt Snowball methods. Each strategy works by tapping into your inherent motivations to make it easier for you to pay off debt.
The bottom line
Credit card debt is difficult to eliminate, but not impossible. Now is the perfect time to start reducing your debt before the next round of interest rate hikes. There are a variety of methods available to help you pay less interest and save money in the long run, so start planning your debt repayment strategy today!
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