2022 has been a tough time for US consumers. Over the past year, credit card debt has jumped by $100 billion, or 13%, the most significant percentage increase in over 20 years. At the same time, more and more Americans are finding themselves falling behind on credit cards and other loans, making it hard to tackle existing credit card debt.
This spiraling debt problem is made worse by rising credit card APRs. Average interest rates have hit a 25-year high, reaching the highest average rate since 1996. That average interest rate is nearly 18% (17.96%) and looks to rise later this week. In fact, experts anticipate an increase of around 150 basis points (1.5% APR) by the end of 2022.
How to Tackle Credit Card Debt
Because of the likelihood of further Federal Reserve rate hikes, coming up with a solution for soaring personal debts is a must. Here are a few options that can help you tackle your credit card debt and free up additional funds as fall and winter approach:
Transfer High-Interest Balances to Another Credit Card
Perhaps the most obvious answer to paying down credit card debt is opting for a balance transfer credit card. Combining multiple balances onto one balance transfer card (preferably one with a lengthy 0% intro APR offer) makes it simpler to focus energy in one direction while streamlining credit card bills into fewer monthly payments.
Keep in mind, however, that transfers must be completed within a set timeframe (usually between three and six months from account opening) and do not include fees. Balance transfer fees typically range around $5 or 3% of the amount of each transfer, whichever is greater.
Here are the balance transfer credit cards with the longest 0% intro APR periods:
|Credit Card||Purchase Intro APR||Balance Transfer Intro APR|
Citi Simplicity® Card
|0% for 12 months on Purchases||0% for 21 months on Balance Transfers|
|0% for 21 months on purchases||0% for 21 months on Balance Transfers|
Chase Slate Edge
|0% for the first 18 months from account opening date||0% for the first 18 months from account opening date|
U.S. Bank Visa® Platinum Card
|0% for 18 months from account opening date||0% for 18 months on balances transferred within 60 days from account opening|
Wells Fargo Reflect Card
|0% for 18 months, potential extension of up to 3 months for meeting minimum requirements||0% for 18 months, potential extension of up to 3 months for meeting minimum requirements|
Consider a HELOC
A HELOC is a Home Equity Line of Credit, and it can help you use your home’s equity to pay off credit card debts at a much lower interest rate. HELOCs are based on the equity you have in your home or property (i.e., how much the property is valued versus how much you owe in mortgages or liens) and can free up as much as 80% of your home’s value or more.
Before considering a HELOC, first, understand the possible pitfalls they entail. Failure to pay off a HELOC or to default on payments can result in the loss of the house. Additionally, repayments are typically interest-only during the initial draw period, meaning higher payments might surprise you (and overwhelm you) if you are not careful.
Try a Different Repayment Method
Another repayment option for card debt might be forbearance If you are struggling with credit card debt. Forbearance is a term referring to financial hardship assistance provided by a lender. When a borrower (cannot make regular payments, the bank may offer temporary assistance to let them regroup financially.
Some of the forbearance and hardship assistance programs available to American consumers include:
- Deferred payments (either with or without interest)
- Delayed payments for the next month
- Waiving of fees (including late fees or annual fees)
Suppose you have considerable credit card debt but can handle your payments. Why not consider a repayment plan like the debt avalanche or debt snowball methods? The approach for both debt avalanche and debt snowball is the same: make consistent minimum payments on outstanding balances except for one, which will be the focus debt. Ideally, you’ll devote extra funds towards this amount, which is usually either the card account with the highest interest debt or the largest balance as the focus of the payoff plan.
The difference lies in the order in which you tackle your debts and whether you want to focus on balance or interest rate:
- Debt snowball focuses on paying your debt in order from the smallest balance to the highest, regardless of the interest rate
- Debt avalanche focuses on paying your debt from the highest interest rate to the smallest, regardless of the balance
Your unique situation and how you view the progress rate when you pay off your debt will determine which route to take. Still, both methods have proven very successful for consumers looking to take charge of their debts.
Our helpful credit card payoff calculator can better help you understand what any new payment plan would be like:
Related Article: Debt Avalanche vs. Debt Snowball
Featured image by StartupStockPhotos /PixaBay
The information related to Citi Diamond Preferred Card and Citi Simplicity Card has been collected by BestCards.com and has not been reviewed or provided by the issuer or provider of this product or service
Editorial Disclosure – The opinions expressed on BestCards.com's reviews, articles, and all other content on or relating to the website are solely those of the content’s author(s). These opinions do not reflect those of any card issuer or financial institution, and editorial content on our site has not been reviewed or approved by these entities unless noted otherwise. Further, BestCards.com lists credit card offers that are frequently updated with information believed to be accurate to the best of our team's knowledge. However, please review the information provided directly by the credit card issuer or related financial institution for full details.