Americans with credit card debt face a double risk.
First, there is inflation. Prices per broad basket of consumer goods 8.3% increase from this time last yeara figure that includes the cost of food, accommodation, gas and medical care goes even higher.
At the same time, credit card interest rates are trending up. In an effort to curb inflation, the Federal Reserve has embarked on a series of short-term interest rate increase, which has pushed up credit card interest rates. Run the balance on your card and you will have to pay it back at an average rate of 18.1%, according to Bankrate – the highest rate since 1996.
“All of these things are interrelated,” said Ted Rossman, senior industry analyst at Bankrate. “Balances are growing because of inflation and because of some good things, like freeing demand for travel. Add in the highest interest rates in two decades and that’s a tough combination.”
The result: Americans now have near-record credit card debt, with the average household owed $8,942, according to the report. recent data from WalletHub.
For residents of some states, the average is even higher. Here are the 10 states with the highest average household credit card debt, according to WalletHub.
- Alaska: $11,277
- Hawaii: 10,190 dollars
- Virginia: 9,176 dollars
- Maryland: 9,120 dollars
- Connecticut: $9,088
- New shirt: $8,956
- Colorado: $8,906
- Georgia: $8,699
- Texas: $8,681
- Utah: $8,527
Alaska also led the way for the largest average increase in household debt in the second quarter of this year, with an increase of $770. Hawai’i ($696), Virginia ($627), Maryland ($623) and Connecticut ($621) rounded out the top five.
If you’re carrying a balance on your credit card, you should make paying it a priority, says Rossman. “If you’re near an average interest rate of 18 percent, think of every dollar you spend on that debt as an 18 percent guaranteed, tax-free, risk-free investment return,” he said.
The simplest way to earn more money to pay off debt is to spend less or earn more. But easier said than done.
Plus, consider these three strategies to help ease the burden of paying off high-interest debt at a time when both costs and interest rates are upward.
1. Sign up for a balance transfer credit card
Once you transfer your credit card balance With one of these cards, you won’t have to pay interest for at least six months and up to 21 months. You can then use that 0% APR period to pay off your debt with no interest charges.
The key to this strategy is not to make any purchases on the new card and just focus on paying off debt, Rossman said. “Divide the amount you owe by the number of interest-free months,” he explains. “You can get out of debt in 21 months with no interest, just pay the transfer fee upfront.”
2. Get a low-interest personal loan
Depending on your credit score, you may be able to consolidate your debt under a personal loan, with banks currently offering interest rates as low as 5.73%. It’s not a walk in the park, but it’s a far cry from the 18% average you’ll pay to carry the balance on your credit card.
3. Using a credit counseling service
A nonprofit credit counseling agency can help negotiate a lower rate for your debts and put you on a payment plan that you can more easily pay. “If you have more than $5,000 in debt, these can be really beneficial,” says Rossman.
However, these services should not be confused with debt settlement or debt consolidation companies, which are often for-profit and employ methods that can increase your credit score. You can find a reputable credit counseling agency through the National Foundation for Credit Counseling’s agent finder.