As interest rates are rising across the U.S., don’t be surprised if you also start seeing higher interest rates hitting your existing credit card balance very soon. According to Lending Tree, the latest Federal data shows that consumer credit card balances rose to $856 billion in Q4 2021. That’s a stunning $52 billion increase from $804 billion in Q3 2021. Staggering inflation is likely to blame for this increase!
About a week ago, the Federal Reserve increased the federal funds rate to curb the effects of massive inflation, which we’re all feeling nowadays. It’s a smart and strategic move to contain out-of-control inflation. But contrarily, when federal funds rates increase, so do credit card APRs (which are not so good). And since this rate hike is just the first of many, with six more expected this year, those APRs will probably continue to rise throughout the rest of 2022 and reach the highest interest rates ever! Credit card debt can be a burden on your wallet, but it can also adversely affect your credit score.
The point is borrowing money is something you’ll want to avoid if possible. You should especially avoid credit card debt, and even more so now with rising interest rates. If you have credit card debt, don’t freak out just yet! Here are key steps to help you focus on paying off that debt before it grows.
1. Open a Credit Card with a 0% Intro APR
This is an easy and smart way to immediately curb your existing debt from growing even more. Luckily, many credit cards offer a 0% intro APR to new cardholders, and you can even transfer your existing debt from a current card to a new card with a 0% intro APR (usually for a nominal fee).
This means that you won’t accrue any interest on credit card debt for a fixed term. Here are some cards that allow you to save money on interest while giving you more time to pay down your debt:
- U.S. Bank Visa Platinum Credit Card (0% intro APR for 24 billing cycles on purchases and balance transfers)
- Bank AmeriCard Credit Card (0% intro APR for 18 billing cycles on purchases, and on any balance transfers made within 60 days of account opening)
- Capital One Quicksilver Cash Rewards Credit Card (0% intro APR for 15 months on purchases and balance transfers)
- U.S. Bank Cash+ Visa Signature Card (0% intro APR for 15 billing cycles on purchases and balance transfers)
It’s important to point out that if you open new credit cards with 0% intro APR over and over again, just to keep moving your debt around interest-free, this can hurt your credit score in the long run. Each time you open a new credit card, it’s considered a hard credit inquiry, which can adversely affect your credit score. If you’re planning on opening just one 0% intro APR credit card and working hard to eliminate your existing balance, this is the best plan of action.
2. Cut Back on Unnecessary Expenses
Another easy step: cut back on those nice but unnecessary purchases. Let’s be honest: you don’t need your daily $5 caramel Frappuccino from Starbucks or your $20 lunch salad at that new restaurant by your office. Simply make some minor lifestyle changes, and you’ll suddenly find that you have more money in your pocket than usual. There are plenty of daily expenses that we can all cut back on. Some examples include:
- Daily coffee ($3-5)
- Dinner at a restaurant ($15-30 per person)
- Getting rid of 1 or 2 streaming services with the help of Truebill
- Downgrade your gym membership to a lower-tier
- Go thrift shopping for clothes rather than buy new clothes
To help yourself out even more, you can even take the money that you were planning on spending on all this “stuff” and instead put it into a “credit card debt savings bucket goal.” This way, you’ll already have the money set aside to pay down your credit card debt as soon as possible.
3. Consolidate Your Credit Card Debt
When your credit card debt is $50,000 or less, you can consider personal loans as 60% of personal loans are already used for debt consolidation. If this statistic caught you by surprise, imagine how many people you know are using personal loans to improve their own financial health!
Since it can be tricky to decide which personal loan is the best for you, use AmOne to help match you with low-interest options. This is useful for when you don’t want to dip into your emergency funds, or want to avoid racking up any more credit card debt, which is a pretty smart move in my opinion.
AmOne’s personal loan options start as low as 2.49% APR compared to some credit card APRs that are as high as 36% nowadays. You’ll be matched in as little as 2 minutes and approved for the funds you need in as little as 1 business day. So, take advantage of lower interest rates fast before those credit card APRs skyrocket.
The Bottom Line
My honest take? 2022 has already proven to be a tough year, financially speaking, and it’s likely going to get more difficult before it gets easier. So, if you owe money on your credit cards, the best time to pay your debt is now.
Never pay the minimum payment and always pay your monthly balance in full if you can afford to. Credit card debt is never a good balance to carry, considering it’s some of the highest interest debt that anyone can have. Now, it’s slated to get markedly more expensive for your wallet. So, pay off credit card debt and act now to take control of your financial future.