by Maurie Backman | Updated Aug. 1, 2021 - First published on July 31, 2021
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New data reveals that credit card holders are borrowing less. That's a good thing.
The more credit card debt you carry, the more money you end up throwing away on interest charges. In fact, it's easy to get caught up in a cycle where you rack up a modest amount of credit card charges, make only your minimum payments, and then accrue interest that leaves you grappling with that debt for years.
But actually, there's some good news on the credit card front. While total household debt rose by $85 billion to reach $14.64 trillion during 2021's first quarter, credit card balances declined by $49 billion, according to the Federal Reserve Bank of New York. That's the second largest quarterly decline since 1999. In fact, credit card balances are now $157 billion lower than they were at the end of 2019.
Of course, just because credit card balances are down on a whole doesn't mean you've made headway in paying yours off. In fact, you may have added to your credit card balance, especially if your income took a hit in the course of the pandemic.
If you're still sitting on an uncomfortable amount of credit card debt, here are a few steps you can take to pay it off.
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You may already be living a frugal lifestyle with no wiggle room in your budget to cut back on spending. But if that's not the case, be honest with yourself about your spending habits and identify at least a few smaller expenses to trim. That way, you'll free up money to pay down your debt.
You may only be able to eke so much money out of your paychecks for debt payoff purposes. If that's the case, look at picking up a side job temporarily, whether it's working evening shifts at a local restaurant or driving for a rideshare service. Since that money won't be earmarked for existing bills, you can use it to chip away at your various credit card balances.
If you have a good credit score, then it pays to look at doing a balance transfer, as it could make your credit card debt less expensive to pay off. With a balance transfer, you move your existing credit card balances onto a new card with a lower interest rate than what you're currently paying. Many balance transfer cards, in fact, come with a 0% introductory interest period that can last a year or longer, so it's an option worth exploring.
If a balance transfer isn't for you, you might look at a personal loan instead. A personal loan lets you borrow money for any purpose. You can take out a loan in the amount of your credit card debt, pay off your cards, and then pay off that loan at a lower interest rate than what your cards are charging. The higher your credit score, the lower a personal loan interest rate you're likely to get, though there are loans specifically designed for people with fair credit.
It's encouraging to see that on a national level, credit card balances are down. But if that's not your situation, don't panic. Instead, take steps to address your debt problem so it doesn't get any worse.
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