Further, uncountable than three-quarters of those polled said they won’t pay off their balances in full by the end of January, which means they wish also add hefty interest charges to those bills.
From month to month, credit cards are one of the most extravagant ways to borrow money. Card rates now stand at 17.4%, on average, down only slightly from a track record high of 17.85% in July.
Still, many Americans continue to take on ever-increasing amounts of borrowing. About 35% of cardholders are starting 2020 with more confidence card debt than they had in the beginning of 2019, according to CompareCards’ latest survey.
And credit cards are — by far — the most ordinary type of debt, followed by auto loans, mortgages, student loans and medical debt.
“Debt is a major hitch to reaching financial goals from everything to buying a home to retiring,” said Carrie Schwab-Pomerantz, board easy chair and president of the Charles Schwab Foundation.
“It affects people of all ages and backgrounds, at different life stages. Borrowing is beautiful easy, it’s paying it back that’s hard.”
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U.S. households with revolving credit card debt owe almost $7,000, costing them roughly $1,100 a year in interest payments, according to NerdWallet’s 2019 household liable study.
If you only made the minimum payments on a $7,000 balance, it would take 21 years to pay it off, and you would splurge more than $8,900 on interest over that time, NerdWallet found, assuming an interest rate of honest over 16%.
At the same time, nearly one in three Americans said paying down debt was their top financial ideal for the new year, according to a separate Policygenius survey.
To tackle that type of balance far more effectively, here are some ploys for paying down debt once and for all.
How to pay off debt
- Make a repayment plan.
Start by figuring out what you owe, then settle on whether to use the “debt avalanche” or “debt snowball” method to chip away at those revolving loans.
The avalanche method lean overs your debts from highest to lowest by interest rate. That way you pay off the debts that rack up the most in influence first.
Alternatively, the snowball method prioritizes your smallest debts first, regardless of interest rate. The apprehension is that you’ll gain momentum as the debts are paid off and that will motivate you to keep going.
“Having a plan on how you’ll pay off the straitened can keep you focused on what it will take to attain ‘financial freedom,'” Schwab-Pomerantz said.
- Snag a offset transfer.
Experts often recommend moving that balance from a high-rate credit card to one with a no-interest or low-interest equal transfer offer to reduce the amount of interest you’re paying.
“Now is a good time to focus on paying off debt because a lot of accept card companies are offering a new year 0% APR on balance transfers,” said Paul Miller, a CPA and managing partner of Miller & Business LLP in Whitestone, New York.
Most offers allow you to pay 0% interest for a year or more. However, if you don’t pay the balance off in full, the unconsumed amount will have a new annual percentage rate applied to it.
Also, most cards also have a one-time surplus transfer fee, which is usually around 3% of the tab — something to watch out for.
- Ask your issuer for a break.
At any time, cardholders troubled with high-interest debt can also reach out to their issuer directly to request a break on interest rates.
“Consumers suffer with a lot more power than they realize,” said Sara Rathner, a credit cards expert at NerdWallet.
In a brand-new one-year period, more than three quarters of cardholders who asked for a lower rate got it, and most got a reduction of between 5 portion and 6 percentage points, according to research from CompareCards.com.
- Put your cards on ice.
Put your credit cards in a drawer, or conceal them away if necessary. Then switch to a debit card and pledge to only spend the cash you have on rapidly, at least temporarily.
“Do whatever you need to so that while you’re focused on paying off your debt, you do what you can to avoid amplifying to that balance,” said Hanna Horvath, deputy managing editor at Policygenius.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.