When the coronavirus crisis forced millions of Americans to hunker down at home this spring amid shelter-at-home and stay-in-place orders, online shopping surged.
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If you shopped a lot online while in quarantine, you may be struggling to pay off your credit card bills, especially if you were furloughed, laid off, or had your work hours reduced. (In fact, roughly 47 million people have filed for unemployment during the pandemic).
The good news is there are several ways you can pay off your credit card debt. Here are some smart tactics you can use to attack your credit card bills.
1. Open a 0% balance transfer card
The average credit card interest rate is 19.02 percent for new card offers and 15.10 percent for existing accounts, according to a recent credit card report. If you’re carrying high-interest credit card debt, transferring the debt to a zero percent balance transfer card may be a wise move.
Most balance transfer cards offer a zero percent interest rate for a year or longer, which can give you some much-needed breathing room to pay off your credit card bills without accruing any interest.
2. Take out a personal loan
If you can find a personal loan that has a lower interest rate than your credit card’s rate, jump on it. Paying off a loan with a lower rate will enable you to pay off more of your debt principal each month and wipe out the debt faster than if you kept it on a high-interest credit card.
Use a tool like Credible to find a lender that offers the best terms for your financial situation.
3. Pay off your bills using the debt snowball or avalanche method
Two of the most popular debt payoff strategies are the snowball method and the avalanche method. The snowball method entails paying off credit card debt in order from the card with the smallest balance to the card with the largest balance. The “snowball” name comes from the idea that, much like a snowball rolling downhill, wiping out your smaller balances first will enable you to gain the momentum that you need to pay off all of your credit card debts.
The snowball method’s counterpart is the debt avalanche method, which involves paying off the card with the highest interest rate first. This approach saves you more money in interest than you’d save with the snowball method.
To select the right payoff method for you, it’s important to consider how you approach debt. If you’re the kind of person who needs encouragement, the debt snowball method may be the right solution; but, if you’re already self-motivated to eliminate your credit card debt, the avalanche method may be a better strategy.
4. Pay in small installments
Many banks are helping customers navigate financial hardship from COVID-19 by allowing customers to pay off their bills through smaller installments or bi-weekly payments, in order to make their debt more manageable. Depending on your situation, you may qualify for credit card forbearance, a method of debt management that allows you to skip or reduce your payments for a set period of time.
Check with your credit card company to see what relief package you qualify for.
Clampdown on your spending
U.S. e-commerce sales jumped 49 percent in April alone, according to Adobe’s Digital Economy Index. Online grocery shopping purchases saw a 110 percent spike in daily online sales that month, Adobe found. Consumers also shelled out on timely apparel: pajama e-commerce sales increased more than 143 percent.
In turn, large online retailers are making a killing. For example, Amazon reported a 26 percent increase in first-quarter revenue, with sales soaring to $75.5 billion, up from $59.7 billion the same quarter a year ago.
The bad news: Many consumers racked up credit card debt. According to a recent survey, 28 million U.S. adults have added to their credit card debt as a direct result of the COVID-19 outbreak. Millennials have been hit the hardest — 34 percent said they went more deeply into debt because of the pandemic, compared to 23 percent of Gen Xers and 15 percent of Baby Boomers.
The last thing you want to do when you’re taking steps to pay off credit card debt is to add to your debt. So, make sure you rein in your discretionary spending, especially online, in the coming months.
One way to curb online shopping is by unsubscribing to emails from online retailers with daily deals, to avoid being tempted to purchase products that you don’t need. You can also install a web extension like StayFocusd, which allows you to set a limit of much time you spend on a particular website.