If possible, the best thing you can do for yourself is to avoid leaving an unpaid balance on your credit card, month after month. Those interest payments add up.
As recently as 2017, the average APR on a credit card was lower than 13%, according to the Federal Reserve. Then, from 2018 to the start of 2022, it usually hovered around 14.5%. But over the past year it started climbing with breakneck speed, and now the average APR has climbed above 19% — the highest it’s ever been.
Here are three strategies to consider:
There’s no end in sight, with plenty of financial experts predicting the average rate will rise above 20% in 2023.
Follow a debt repayment strategy. Two popular ways to break down debt repayments are the debt avalanche and debt snowball methods. Using the debt avalanche method, you’ll pay off your highest interest card first. With the debt snowball method, you’ll pay off the smallest balances first.
Look at your latest credit card statement. Check your credit card’s interest rate. If you have more than one credit card, check all your cards. Are any of your cards charging more than 19% interest? If so, then you definitely need to negotiate that down.
Remember, don’t get stuck in the credit card trap. Nowadays, swiping that plastic is pricier than ever.
Your credit card’s interest rate, also known as an APR, has probably gone up just like all the other credit cards have. (Most credit cards have a variable rate.) Have you checked lately? If you have an unpaid balance, your card is probably charging you a surprising amount of interest on it right now.
We have a whole guide for how to pay off credit card debt.
Just Ask for a Lower Rate
If you’re unhappy with your APR, ask for it to be lowered. Do this for each of your cards.
A few things to keep in mind:
Most credit cards have a variable interest rate that follows what the Federal Reserve does, and the Fed keeps raising interest rates in an effort to fight runaway inflation. That’s why you can expect your credit card APR to go up, not down — at least for now.
- If you have a history of making your monthly payments on time, make sure to mention that.
- Are you getting any offers in the mail from other credit card providers? Make sure to mention that, too. Your credit card company doesn’t want to lose your business.
- Do a little homework before making that call. See if you can find a better offer for a comparable credit card — one that’s roughly similar to yours.
- If you’ve had the same credit card for a long time, mention what a loyal customer you are.
It’s worth trying this because credit card debt is the most expensive kind of debt you can have. Credit cards charge you higher interest than mortgages, car loans, personal loans or lines of credit.
How to Pay Off Credit Card Debt
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Suddenly our credit cards are bleeding us dry. Here’s how fast rates are rising:
The worst thing they can do is say “no.” Big deal.
Don’t be chicken. The phone number for customer service is right there on the back of your credit card.
Get a debt consolidation loan. If you get a loan with a lower interest rate and pay off your credit cards, that lower rate could potentially save you thousands of dollars in interest. This is a realistic way to pay off credit card debt if you currently have little or no money to put toward it. It’s easier than you think to get a personal loan online or from your bank. If you’re a homeowner, you might think about a home equity loan.
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Swiping your credit card has now become more expensive than ever, and it’s because credit card interest rates are rising crazy fast. That’s why we think you should call your credit card company and ask for a better rate — pronto.