The past year has posed several financial challenges for consumers amid record-high rates of inflation as the omicron variant of the coronavirus impacts the U.S. economy. As a result, Americans are becoming increasingly dependent on high-interest credit cards.
Revolving credit balances reached $1.04 trillion in Nov. 2021, according to Federal Reserve data, which is the highest they've been since the COVID-19 pandemic began in March 2020. While many consumers paid down high-interest debt in the early stages of the pandemic, that trend began to reverse in 2021.
Keep reading to learn more about increasing credit card usage, including how you can pay off your credit card debt with credit counseling, debt consolidation loans and balance-transfer credit cards. You can compare offers on a number of debt management products for free without impacting your credit score on Credible.
How to get out of credit card debt
Making the minimum payment on credit cards may keep you from missing your payment due date, but it's a costly debt repayment method. That's because credit card interest rates are high at 16.44%, according to the Fed. Plus, unpaid credit card balances compound interest daily, which can accumulate significantly over time.
If you're struggling to repay credit card debt, consider a few debt repayment methods in the sections below.
Meet with a credit counselor
Nonprofit credit counseling agencies offer free and low-cost financial services to consumers who need help managing debt, including credit card balances. A credit counselor may help you set a monthly budget or enroll you in a debt management plan (DMP).
Credit counselors may also be able to negotiate with your creditors to lower your debt amount or the interest rate you're paying. You can find a list of approved credit counseling agencies near you on the Department of Justice website.
Use a debt consolidation loan
A debt consolidation loan is a type of unsecured personal loan that's used to repay higher-interest debt on a predictable payment schedule. Personal loan interest rates reached record lows in Q4 2021, the Fed reports, averaging 9.09% for the two-year loan term.
Since personal loans offer low, fixed rates, they can be used to help consumers save money while they pay off high-interest credit card debt. A recent Credible analysis found that well-qualified borrowers have the potential to save nearly $2,400 by consolidating credit card debt with a personal loan. It may also be possible to reduce your monthly payment.
Use a personal loan calculator to estimate your monthly payments, so you can determine if this debt payoff method is right for your financial situation. You can compare debt consolidation loan interest rates across multiple lenders at once on Credible.
Open a balance-transfer card
It may be possible to pay off your debt at a lower rate with a credit card balance transfer. This is a type of credit card that allows you to move the balances of one or more cards onto a new credit account with a lower interest rate.
Some credit card issuers may charge a balance-transfer fee of 3-5% of the total loan amount. But this can be offset if you're able to qualify for a credit card with a 0% APR introductory offer. These promotions are typically reserved for borrowers with very good to excellent credit, which is defined by the FICO model as 740 or above.
Zero-interest credit card offers can last up to 18 months, which gives consumers some time to pay off their current credit card debt without paying interest. At the end of the introductory offer, the remaining balance will be charged interest.
See if you qualify for a balance-transfer offer on Credible, so you can begin paying off your credit card debt at a lower interest rate.
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