Credit card interest rates are rising, start paying it down now!
If you carry a balance on your credit cards, now may be the time to start paying it down. Learn about several strategies that can help you reach your goal.
Learn how to get out of credit card debt before interest rates rise again.
Bad news for the average American consumer, as interest rates are nowhere near the end of its continued rise. With rates set for a new increase soon, financial experts say that now is the best time to pay off all high-cost credit card debt.
So far, the annual percentage rates on cards are just little over 16%. However, APRs are likely to go up even further due to the Federal Reserve’s rate hiking cycle. With a half-point increase expected for all remaining meetings in 2022, APRs could go even higher than 17.8% – a record set in 2019 for credit card interest rates.
That could really offset Americans who are currently struggling with outstanding bills to pay. According to a recent report from the Federal Reserve Bank of New York, credit card balances reached an impressive $841 billion during this year’s first trimester. During the same period, approximately 229 million consumers opened new card accounts, which is an increase from the previous quarter.
Suze Orman, a personal finance expert, says that the key to get rid of credit card debt is to avoid paying high-interest rates on said debt. But how can the average consumer pay-off their credit card debt in the current economic conditions?
Find lower interest rates
Orman believes that the first step towards diminishing debt is to try and lower the interest rates of what you owe. By doing so, you’ll be able to pay off debt much faster and ensure that what you’re paying for is applied to actual debt instead of accrued interest.
The two most popular ways of doing that is choosing a new balance transfer credit card that provides a 0% intro APR for a fixed period of time. The second way is to take out a personal loan with an interest rate lower than your credit card’s. That way you can work with a credit counselor in order to consolidate your credit card debt with a much lower interest rate.
However, it is important to note that both options depend on your personal financial situation and how high your credit score is. For consumers with damaged or lower scores, Orman recommends looking for assistance from the National Foundation for Credit Counseling. That way, you can lower your rates while creating a functional payment plan.
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If you plan to pay down your credit card debt while still using the cards, there are two alternatives you can choose to wipe away an outstanding balance. The first one is to start by paying off the smallest one to give you momentum.
The second option, and the most used by consumers nationwide, is to round up all outstanding debt and focus on the one with the highest interest rate. That means paying less money in the long run to decrease your credit card debt because you’re focusing on the ones with a high interest rate first.
A great way to do that is to transfer your debt to a balance transfer credit card. Currently, there are many issuers that offer up to 15 months of 0% APR for new customers. If you’d like to know how it all works, follow the link below for more information.
About the author / Aline Barbosa
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