Credit Card Debt Is at an All-Time High. Here’s How You Can Get Rid of Yours

It may take time, but it’s possible to get out of credit card debt.

The latest credit card debt statistics are astounding. Americans now owe a collective $986 billion to credit card companies at the end of 2022, according to the Federal Reserve Bank of New York. That’s a new record high, and even if you only make a fraction of it, it can still cause a lot of stress.

Credit card debt isn’t always easy to pay off once you’re there, but it is possible. Here are three things you can try.

1. Reset your budget

You need extra cash to pay back your credit card debt, and there are several ways to get it. First, you can reduce your monthly expenses. Give up discretionary purchases, such as eating out, and use the extra money to pay down your debt.

If this is not enough for you, try increasing your income as well. You can do this by working overtime at an existing job, negotiating a raise, or starting a side business. You can also apply for a better paying job elsewhere. Again, include any extra money you bring for your debt payments first. Once you’re done, you can start spending extra or save it for other purposes.

2. Use a balance transfer card

Balance transfer credit cards temporarily stop your balance from growing so any payments you make go to the principal. The length of time you have until your balance starts earning interest again depends on the card’s 0% introductory APR period. Some may only last for a few months while others may last more than a year. Try to choose a card with an early April period that is long enough to allow you to repay all your debts.

Note that you’ll pay a fee to make a balance transfer, and you can’t transfer a balance to a new credit card with the same issuer you owe. Also, if you don’t pay off your entire balance before the introductory APR period expires, your balance will start earning interest again.

You can find balance transfer cards with almost all popular credit card issuers. But don’t expect much in terms of rewards. The 0% introductory APR is their main draw. Once you’ve paid off your debt, you may want to switch to a rewards credit card so you get a little back on your purchases.

3. Try a personal loan

Personal loans are unsecured loans — loans that don’t require collateral — that you can use for anything, including paying off debt. It’s often possible to borrow thousands or even tens of thousands of dollars, depending on your lender and credit provider. This gives you predictable monthly payments, so you don’t have to worry about additional interest charges on your credit card. You’ll know exactly how much you owe each month and how long until you’re debt free.

Personal loans still charge interest, and rates can be higher than many other types of loans, such as car loans or mortgages. This is especially true for those with bad credit scores.

Lenders may also charge an origination fee. This can vary depending on the size of the loan and the lender. It’s a good idea to compare the options of several companies before deciding which company you want to work with.

Stick with it

Unless you win the lottery, you probably won’t pay off your credit card debt overnight. And that’s okay. Accept that it will take time, and don’t let that discourage you from trying. Weigh up the strategies above and decide which one works best for you. Then give it a try. You can always try something different if your initial approach doesn’t work.