The One Change You Need to Make Amidst the $1 Trillion Credit Card Debt

America's dependence on credit cards has reached an all-time high. Recently, U.S. households' credit card debt reached $1.13 trillion, a 21% increase over the past four years.

Americans are having difficulty keeping up with inflation and interest rates over the past few years, which have made groceries, housing costs, car payments, and nearly everything else more expensive than before. While inflation has slowed down recently, much of the damage has already been done to people's budgets.

The high cost of living has forced many Americans to reach for their credit cards to solve their immediate financial needs. If you're one of them, there are a few steps you can take to begin getting out of credit card debt. The first change you need to make is lowering your interest rate.

Lower your interest rate

The average American household has $6,501 in credit card debt right now. That amount can be difficult enough to pay off, but high interest rates have made the problem worse. The Federal Reserve increased the federal funds rate over the past two years, which has caused credit cards' variable interest rates to rise.

The result is that many people now pay an average credit card APR of more than 20%.

To better understand how interest rates affect credit card balances, let's calculate a credit card payoff. The typical consumer pays $430 toward their credit card debt every month. If you have a starting balance of $6,501 and pay 20% interest, it will take you 18 months to pay it off -- and you'll have spent a total of $7,553.

That means you will spend $1,052 in interest alone.

While the Fed may be in charge of setting interest rates for everyone, you can take control over your rate relatively quickly with two simple moves.

How to lower your interest rate

Historically high credit card debt and interest rates are the bad news. The good news is that by asking for a lower interest rate or opening a balance transfer credit card, you can likely lower your interest rate, spend less money in total payments, and pay off your debt faster.

RELATED: How Does a Balance Transfer Work?

Here's how to lower the interest rate on your debt.

1. Ask for an interest rate reduction

Some studies have shown that you have a 50% to 81% chance of getting a lower interest rate simply by calling your credit card company and asking for it. Doing so could significantly lower how much you spend on interest.

For example, let's assume your credit card company agrees to lower your interest rate from 20% to 17%, and you continue making the average of $430 in monthly payments on $6,501 in debt. You'll pay off the debt in 17 months and spend $867 in interest, saving you $185 and allowing you to pay the debt off one month earlier than with a 20% interest rate.

The key to this strategy is to be persistent. If the credit card company says it won't lower your interest rate, continue making on-time payments, call back in a few months, and ask again.

2. Find a balance transfer credit card

Balance transfer credit cards have introductory interest rates that are very low, often 0%, which can help you make payments without incurring interest.

Here are a few things you should know about balance transfer cards:

• The intro 0% APR usually expires in 15 to 21 months: Pay off your entire balance before the intro period ends to avoid paying any interest. After the intro period ends, the interest rate will be whatever is specified in the original terms.
• There's a balance transfer fee: Most cards charge a fee of 3% to 5% of the amount you transfer to the new card.
• There may be a cap to how much you can transfer: Some credit card companies will limit your balance transfer amount to 75% of your credit limit, or they may specify a specific dollar amount. For example, some Chase cards have a balance transfer limit of $15,000.

Using the same example as before, let's assume you're approved for a balance transfer card with a 0% intro APR for 18 months, and the card has a 3% balance transfer fee.

The 3% balance transfer fee will cost you about $195 to transfer the $6,501 in debt to the card. If you pay $430 per month on the now $6,696 ($6,501 plus $195) balance, it will take you 16 months to pay off the card, and you'll spend $0 in interest. In this scenario, the $195 balance transfer fee is well worth the cost!

While not everyone will benefit from a balance transfer card, it can be a great way to manage your interest rate while making payments. The most important part is to stay consistent with payments and not add to the balance while paying it down.