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Americans aren't strangers to credit card debt. In fact, they collectively owe $807 billion in credit card debt, according to new research by The Ascent. The average American credit card balance, meanwhile, is $5,897, and although that may not seem like such a huge sum, it actually is.
If you're carrying a balance of $5,897 on a credit card charging 20% interest and it takes you five years to pay it off, you'll wind up spending a total of $3,477 on interest throughout that repayment period. That's a lot of money to give up needlessly.
If you're sitting on a credit card balance that's comparable to the average American's, a better bet is to pay off that debt quickly and efficiently. Here are some options to consider for doing so.
1. Do a balance transfer
Transferring your existing credit card balances onto a new card with a lower interest rate certainly won't get rid of your debt, but it could make that debt less costly to repay. That way, you'll accrue less interest as you pay your new balance down. Some balance transfer cards even offer a 0% introductory rate, which will help you get a jump start on your debt.
2. Consolidate with a personal loan
While some balance transfer credit cards offer competitive interest rates, you might pay even less interest on your debt with a personal loan. A personal loan can be taken out for any reason, and if you have great credit, you might qualify for a rate as low as 2.49%. Once you get that loan, you can use it to pay off your credit card balances, and then just repay that single loan in equal installments until it's done.
3. Do a cash-out refinance
If you're sitting on a lot of credit card debt and are a homeowner, a cash-out refinance could make sense for you. With a cash-out refinance, you swap your existing mortgage for a new one, only you borrow an amount that exceeds your remaining mortgage balance. That extra cash can then be used for any purpose, like a personal loan, so you can apply it to your existing credit card balances and just pay off your mortgage with a single monthly payment. Given that the average refinance rate as of this writing is 2.886% for a 30-year fixed mortgage and 2.461% for a 15-year mortgage, that's a far lower rate than what the typical credit card will charge. (To be clear, though, these rates are generally reserved for borrowers with top credit scores, and if yours isn't great, you could be charged a higher rate.)
Whether your credit card balance is higher or lower than the average American's, the sooner you pay it off, the less money you'll waste racking up interest charges. Plus, knocking out credit card debt is a great way to help your credit score improve. So rather than bemoan your credit card balance, figure out the best solution to rid yourself of it once and for all.