money.andronezia.com Suka mengabarkan info terkini
Americans have accumulated nearly $1 trillion in credit card debt, a record amount. High inflation and the end of the pandemic stimulus program forced many people to drain their savings and use credit cards to cover their daily needs.
Taking on credit card debt can be a very slippery slope. Taking on even a small amount of debt without the intention or ability to make timely payments can open the floodgates for taking on more. And with the Federal Reserve’s campaign to control inflation by raising interest rates, paying off credit card debt is getting more and more expensive.
If you’re one of the millions of Americans struggling to get out of credit card debt, there may be light at the end of the tunnel, but it may take a lot of discipline.
Here are some of the best ways to pay off your credit card debt and how to stay debt free in the future:
Credit card debt tolls on people:‘Things just keep getting more expensive and worse’: Credit card debt is soaring but fewer Americans can pay it off
Learn more: The best debt consolidation loans
Credit card debt:US credit card debt is hitting record highs as inflation puts pressure on consumers financially
Start a budget
Keeping to a budget is one of the best ways to make sure you’re not spending more than you can afford, says Marc Russell, founder of BetterWallet, a financial literacy education platform, and a member of the Financial Health Council of National Debt Relief, a debt settlement. company. .
She recommends you first inventory all your expenses in a typical month (think food, gas, car payments, housing, utilities, debt obligations, etc.). Then allocate a portion of your salary for each expense.
If your expenses exceed your income, you should evaluate where you can cut back. Maybe you can get by without a faster, more expensive internet plan, or maybe you just need to cut back on the number of Ubers and take public transit even if it takes longer.
If you have some of your paycheck left over, don’t think of it as extra money because it can tempt you to spend beyond your means, says Russell. Instead, provide a custom label. For example, if you know you’re going to want to buy makeup in a month, set aside a certain amount under the “beauty products” bucket in your budget.
Plan B for canceling student loan debt?:The White House won’t go there even as the pressure builds
Auto payable:Amid the pandemic, borrowers with low credit are falling behind on car loans
But if you can limit your spending on non-necessities that’s even better because you can put that money into your savings or invest it. Ideally, there shouldn’t be any unallocated portions of your salary after you’ve completed this exercise.
This strategy helped Russell pay off $10,000 of credit card debt he accumulated after graduating college in 2012. He continues to budget this way and puts aside $20 a week for a 2011 model year car that he estimates will need repair in the near future.
Debt payment calculator
Once you’ve done that, map out how long it will take you to pay off your credit card debt. You can get a feel for it by entering your expected balance, interest rate, and monthly payment into a debt payment calculator.
The average American has $5,910 in credit card debt, according to Experian. The average annual percentage rate, or APR, on cards is currently 20.37%, according to Creditcards.com.
If Americans only made the monthly payments their credit cards required, which is typically about 2% to 3% of their balance if they owed more than $1,000, it would take five years to pay off all the debt.
Contact your credit card company
If you’re having trouble making the minimum monthly payment, you should contact your credit card company, says PNC Bank’s head of Credit Cards, Rachana Bhatt.
If you don’t make these payments, the company can charge you more and increase the interest rate on your debt. Plus, it will hurt your credit score.
Be proactive and stay in touch with your lender or lender,” says Bhatt. “They may be able to help and offer additional resources or payment options.”
Balance transfer credit card
Once you have a budget and a plan for how you are going to pay off your debt, it may be worth looking into a balance transfer credit card. These cards often have introductory offers where you can get 0% APR for up to 21 months. For a small fee, usually around 3% to 5% of your debt, you can transfer it to a new card and basically pay off your debt interest-free.
For an American with an average amount of credit card debt, the transfer fee will amount to around $240. But if they could pay their debts during the 0% APR period, they would save about $3,185 in interest they would have paid if they had made the minimum monthly payments over five years.
balance transfers:Best balance transfer credit card
If they do not pay off their debt before the 0% APR period ends, then the card’s regular APR will be charged. That’s why it’s so important to stick to a plan for paying off debt, says Russell.
It’s also important to remember that a 0% APR doesn’t always apply to new purchases you make with a balance transfer card. And not everyone qualifies for the 0% offer, especially if they have a credit score under 669, according to Experian.
Debt consolidation program
One option to consider is a credit card or debt consolidation loan. These loans often advertise lower interest rates for combining all of your debts and paying them off in one loan.
Bhatt of PNC Bank says it’s also “a great tool for eliminating multiple payments sent each month and reducing it to one monthly payment.”
Under a debt consolidation loan, the lender will directly deposit money into your bank account in the hope that you will use it to pay off the debt that you are consolidating or the lender will pay the balance for you. That doesn’t mean you’re debt free. You are responsible for making monthly payments to the lender.
Is a debt consolidation loan a good idea:More and more Americans are wondering because the Fed is raising interest rates
Personal loans:How to use personal loans to work towards financial freedom
The downside is that these loans often require you to pay off your debt for a longer period of time which can end up costing you more than if you don’t follow the debt consolidation route.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can Ffollow her on Twitter @BuchElisabeth and sign up for our Money of the Day newsletter here
