How to tame your credit card debt in 2023
Credit card interest rates have reached record highs.
It had to happen.
That scenario occurred, and it's likely worse than card consumers expected.
A case in point.
According to a new
"This year's increase is all about the
How do significantly higher interest rates impact credit card users? Rossman lays that scenario out – and it's not pretty.
"If you have
What makes the current situation especially bad is the record amount of credit card debt outstanding.
"That's based on Fed data going back to 1968, so we can confidently say it's a true record. This amounts to very bad timing on the part of consumers," said Credit Sesame financial analyst
Credit Sesame calculated the total amount of interest consumers would have to pay over the course of a year, based on the current average credit card interest rate and the total amount of credit card debt outstanding.
"It comes to over
All that's an added burden for already stressed financial consumers.
"The higher rates and inflation are playing a number on the budgets of many households and consumers are hurting," said Supermoney.com financial planner
How to Mitigate High Credit Card Interest Rates
There is some good news. Personal finance experts say there are myriad ways to curb the downside impact of skyrocketing credit card rates. Here's a quick rundown.
Leverage balance transfer cards: If your credit card debt is stacking up, Rossman recommends signing up for a 0% balance transfer card, which allows consumers to pause the interest clock for up to 21 months.
Avoid making just the minimum payments: Consumers should avoid paying off debt over an extended amount of time as it creates additional unwanted interest.
"For example, if you have
Never carry a balance. Yes, it's not easy, but the most efficient way to tackle high credit card rates is by not having any account balance debt at all.
"You don't want to pay a 19.4% APR unless it's an emergency, so stop all unnecessary purchases until you are bringing in more than you're spending," Latham advised. "If that's not an option right now, keep spending to a minimum and try to increase your income."
Consolidate high-interest credit card debt with a lower-interest loan. If you have a high-interest credit card balance and are unable to negotiate a lower rate or transfer your balance to a lower-rate card, take direct action.
"You may want to consider taking out a personal loan or a secured loan to pay off your credit card debt," Latham said.
Look for strong sign-up bonuses: Credit card sign-ups remained high as credit remained widely available this year, but strong bonuses were not as prevalent.
"Consider shopping around before committing to a credit card," Rossman said.
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