Credit balances rise as Americans become more dependent on credit card debt
Credit balances rise as Americans become more dependent on credit card debt

According to the Federal Reserve, credit card balances have reached pre-pandemic levels, which means many consumers may be looking for ways to consolidate multiple debts. (iStock)

The past year has brought several financial challenges to consumers amid record high inflation rates as the omicron variant of the coronavirus impacts the US economy. As a result, Americans are becoming increasingly dependent on high interest credit cards.

Revolving credit balances reached $1.04 trillion in November 2021, according to Federal Reserve Datawhich is the highest since the start of the COVID-19 pandemic in March 2020. While many consumers paid off their high-interest debt at the start of the pandemic, this trend began to reverse in 2021 .

Revolving credit balances, April 2020 - present

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 credit cards. balance transfer credit. You can compare the offers of a number of debt management products for free without affecting your credit score on Credible.

HOW LONG DO NEGATIVE ITEMS STAY ON YOUR CREDIT REPORT?

How to get out of credit card debt

Making the minimum payment on credit cards can save you from missing your payment due date, but it’s an expensive method of paying off debt. That’s because credit card interest rates are high at 16.44%, according to the Fed. Additionally, unpaid credit card balances earn interest daily, which can add up significantly over time.

If you’re having trouble paying off credit card debt, consider some debt repayment methods in the sections below.

WHAT IS A PERSONAL LINE OF CREDIT?

Meet with a credit counselor

Non-profit credit counseling agencies provide free, low-cost financial services to consumers who need help managing their debts, including credit card balances. A credit counselor can 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 reduce the amount of your debt or the interest rate you pay. You can find a list of approved credit counseling agencies near you at the Department of Justice website.

REFINANCING YOUR STUDENT LOANS CAN SAVE YOU $250+ PER MONTH

Use a debt consolidation loan

A debt consolidation loan is a type of unsecured personal loan used to pay off higher interest rate debt on a predictable payment schedule. Personal loan interest rates hit record highs in the fourth quarter of 2021, the Fed reports, averaging 9.09% over the two-year loan term.

Average two-year personal loan rate, Federal Reserve

Since personal loans offer low fixed rates, they can be used to help consumers save money while paying off high-interest credit card debt. A recent analysis by Credible found that 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 lower your monthly payment.

Use a personal loan calculator to estimate your monthly payments, so you can determine if this method of paying down debt is right for your financial situation. You can compare debt consolidation loan interest rates from multiple lenders at once on Credible.

PERSONAL LOAN OR CAPITAL LOAN: WHICH IS BETTER?

Open a balance transfer card

It may be possible to pay off your debt at a lower rate with a credit card balance transfer. It is a type of credit card that allows you to transfer the balance of one or more cards to 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 that can be offset if you are able to qualify for a credit card with a 0% APR introductory offer. These promotions are generally reserved for borrowers with very good to excellent credit, which is defined by the FICO model like 740 or higher.

Zero-rate credit card offers can last up to 18 months, giving consumers time to pay off 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 start paying off your credit card debt at a lower interest rate.

THE AMERICAN EXPRESS MAGAZINE PLATINUM CARD®

You have a financial question, but you don’t know who to contact? Email the Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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