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Credit card debt is getting more expensive. The average credit card APR is now over 17%, and some rates are as high as 28%. If you’re carrying a balance on your credit card, you’re probably feeling the pinch. You may be tempted to transfer your balance to a new card with a 0% introductory APR. But before you do that, consider alternative personal loans. Traditional personal loans have much lower interest rates than credit cards, so you’ll save money on interest charges. And if you have good credit, you may be able to qualify for a 0% intro APR personal loan, which would give you even more time to pay off your debt without accruing interest charges. So before you transfer your balance to a new credit card, explore all of your options to find the best way to pay off your debt.
The primary reason credit card debt is becoming more expensive is that the interest rates on loans have been rising for a long time. The Federal Reserve has raised interest rates numerous times this past year, leading to higher borrowing costs for everyone, not just people with credit card debt. If you’re not careful, you could find yourself spending more money than you are making each month, and that’ll add up fast.
There are a few reasons for the increase in interest rates. One is that the Fed wants to raise interest rates to reduce inflationary pressures in the economy. Another reason is that banks are trying to make more money by lending out more money than they have before, so they’re raising rates to mitigate their risk.
Credit card debt can be a burden, but there are things you can do to reduce your debt:
One is to try and pay off your debts as quickly as possible. This isn’t always easy, but it will help you save money in the long run.
Paying off more than the required minimum balance can go a lot further than you think. Even an additional $10 or $20 a month can save you hundreds in interest in the long run.
Another option is to look into refinancing your debt. Refinancing can often decrease the interest rate on your debt, saving you a lot of money in the long run.
If you have a decent credit score, consider applying for a new credit card with a promotional 0% APR and transferring your outstanding balances over to it. That way, you’ll be able to pay off your debt without accruing additional interest; just don’t use that newly available credit to start overspending again. Otherwise, you’ll end up back where you started, but even further in debt.
If none of those options appeal to you, you may consider getting a debt consolidation loan. A debt consolidation loan combines several smaller debts into one large loan, often leading to a lower interest rate and better terms.
Finally, when all else fails, there’s always the option of declaring bankruptcy. Declaring bankruptcy isn’t an easy decision, and it will have lasting effects on your credit report for several years, but it could be the best option if you’re genuinely unable to get ahead of your debt.
As interest rates continue to rise, managing your credit card debt load will become increasingly difficult. Taking steps now to help reduce your debt load will save you potentially thousands of dollars in additional interest every year. Don’t wait for another interest rate increase; start working on becoming debt-free as quickly as you can.
