Americans managed to pay off their credit card debt during the coronavirus pandemic, according to Federal Reserve data. But they have since increased their revolving debt balance by using their cards again.
Revolving consumer credit grew at an annual rate of 10.9% in the second quarter of 2021. June was the strongest month for credit card spending — revolving credit grew 22.3% one year to the next. Although spending slowed slightly in July, it is still close to $1 trillion.
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The last time revolving credit balances topped $1 trillion was in April 2020, before the COVID-19 pandemic slowed consumer spending.
If you’re one of the many Americans who have increased your credit card spending in recent months, you might be looking for a way to reduce your spending. There are several ways to pay off credit card debt fast, such as debt consolidation loans, balance transfers, and other debt repayment strategies.
Compare your options in the analysis below and visit Credible to compare debt consolidation products like personal loans and balance transfer cards.
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Using a Personal Loan to Pay Off Credit Card Debt
If you make the minimum payment on your credit card debt each month, the outstanding balance increases due to high and variable interest rates. Revolving credit card debt is a costly burden that can keep you from reaching financial milestones like buying a house or going back to college.
On the other hand, personal loans have low, fixed rates that allow you to pay off your debt within a specified time. Your monthly payment will always be the same and you will know exactly how long it will take to pay off your debt.
The average personal loan interest rate was 9.58% in the second quarter of 2021 according to Fed data, assuming a two-year repayment term. In contrast, the average credit card interest rate for all accounts assessed was 16.30% over the same period. By qualifying for a lower rate, you can save hundreds of dollars in interest charges while becoming debt free.
Personal loan rates can vary widely from lender to lender depending on the borrower’s credit rating and the term and amount of the loan. For this reason, it’s important to seek out the lowest interest rate possible to ensure you get the best rate for your situation.
You can compare interest rates from multiple lenders without affecting your credit score on Credible. The table below shows estimated personal loan interest rates from actual lenders.
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Open a credit card with balance transfer
Another common way to pay off credit card debt is through a balance transfer. This allows you to transfer the balance from one or more credit cards to another credit card, ideally at a lower interest rate. Even better, you might be able to get a 0% APR introductory offer, which lets you pay off your high-interest credit card debt without paying any interest at all.
Keep in mind that introductory periods usually only last for a set period of months, giving you a limited time to pay off the balance during the introductory period before interest kicks in. Plus, you’ll need a good or better credit score to qualify for the best balance transfer deals.
You will also be charged a balance transfer fee of around 3-5% of the total balance, although some balance transfer cards do not charge a fee. And consider a credit card’s balance transfer limit to make sure it’s not less than the amount you owe.
You can browse credit card companies’ balance transfer offers on Credible’s online financial marketplace.
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Try an expert-approved debt repayment strategy
You can also try to pay off your credit card debt without taking out another loan or another credit card. Two common debt repayment strategies are the debt snowball method and the debt avalanche method.
The debt avalanche strategy can help you save the most money over time. This is because you will prioritize paying off credit card balances that have the highest interest rate.
The debt snowball strategy can help you get a boost in paying off your debt – you start by paying off the lowest balance, move to the next smallest balance and save the biggest credit charges for the end.
Still need help deciding which strategy is best for you financially? Visit Credible for answers to all your debt repayment questions.
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