Credit Card Interest Rates Are at an All-Time High. 3 Ways to Get Rid of Your Debt Now

Credit card debt is a huge problem in the U.S., with the average American family owing $8,590. That's tough to pay back on its own, but it's even tougher when you add in the interest credit card issuers tack on every month.

Those rates have been climbing steadily over the last decade and have now reached an all-time high, according to the Consumer Financial Protection Bureau. The average credit card interest rate in 2023 was 22.8%, compared to just 12.9% in 2013. This makes getting out of credit card debt a real challenge, but the following three tips could help you do it.

1. Try the debt avalanche method

This is the simplest solution to credit card debt if you're able to swing it. You start by reviewing your budget and looking for areas to reduce costs. A budgeting app could help you keep track of where your money is going if you don't want to do this manually.

Then, you take any extra money you're saving and put it toward your credit card debt. You pay the minimum balance on all your cards to avoid late fees. Then, you put any extra cash toward the card with the highest interest rate first. When that's paid off, you move onto the card with the next-highest interest rate, and so on.

Another option is the debt snowball method. It's essentially the same as the avalanche method but you put your extra cash toward the card with the lowest balance first. This can help you feel as if you're making progress by reducing the number of debts you have more quickly, but you could pay more in interest this way.

2. Open a balance transfer card

This strategy pairs well with the previous one. Balance transfer cards temporarily halt the growth of your balance, so all the money you pay in each month goes toward reducing your principal. But this doesn't last forever. The 0% introductory interest rate usually only lasts for a few months. If you don't pay the full balance off in time, your remaining debt will begin to accrue interest at the standard interest rate.

Balance transfer cards also have one-time fees (often 3% to 5% of the balance you transfer), and this gets added to your principal. In addition, you cannot open a balance transfer card with an issuer you currently owe. You need to work with a new credit card company. 

Choose a card you're interested in and check its cardholder agreement to find out how much you could pay to do a balance transfer. And if you have any questions, reach out to the issuer for clarification before you open the card.

3. Take out a personal loan

Personal loans give you regular monthly payments, so they're a great option if you're trying to stop your balance from ballooning any further. You don't need any collateral for these loans either. But because of that, their interest rates are higher than other types of installment loans, like mortgages or car loans. 

Personal loans have closing costs and you'll pay interest as well. But you may be able to spread your payments out over several months or years so you don't have to pay too much every month. 

Each lender sets its own loan terms and interest rates, so it's best to get quotes from several of the top providers before settling on one. Be sure you understand how much you'll pay per month and overall before you take out the loan.

No matter what strategy you choose, it's important to take things one day at a time. Getting out of credit card debt is a process, so celebrate the small victories along the way. You may also want to be careful about what you charge to your credit cards going forward so you can avoid racking up new debt.