According to a recent report from CNBC, consumer credit card debt in America is on its way to an all-time high. (1) Much of this is likely due to fallout from the COVID-19 pandemic, which put a strain on many people's finances. Inflation is also a contributing factor. Prices are higher, and consumers often want to maintain their current lifestyles, even as the cost of those lifestyles goes up. As a result, they are putting more purchases on credit and racking up debt in the process. Try these six tips if you want to lower your credit card debt.
1. Reduce Card Use
If you have a great deal of credit card debt, try to wean yourself off credit card use, at least for a while. Adding to the current balance will make it harder to pay down, especially with interest. Try to use cash or your checking account first when making purchases.
2. Trim Expenses
Look for areas in your spending that can be reduced. Look at the subscriptions and memberships you're paying for, and determine which ones you can do without. Try saving money at the grocery store, eat out less often, and look for other ways to “tighten your belt.” Any expenses that are be reduced can get your debt paid off more quickly. Put the money you save from trimming these expenses toward your credit card debt, and you should see an immediate impact.
3. Increase Your Monthly Payment
If you've been paying only the minimum amount due for your monthly credit card payments, it's time to start paying more on a regular basis. This is one of the best ways to start bringing your balance down. Whenever your budget has extra money left over, apply that toward this
debt.
4. Increase Payment Frequency
Just because your credit card bill comes once a month, that doesn’t mean that’s the only time you can make a payment. Start making in-between payments to see the balance come down at a faster rate. Any time you have extra money left over from one pay period, put some toward your balance.
5. Focus on the Card with the Highest Interest Rate First
Try tackling the highest interest rate first, if you have debt with multiple cards.
"High interest rates can be seriously punishing, so tackling the card with the biggest rate first will have the most effect on your finances in the long run. Plus, you’ll be avoiding paying interest on the highest amounts long-term," says Holly Parker at the MintLife blog. (2) "The point here is to pay off the balance with the highest interest rate, not the highest balance. Attempting to pay off the highest balance first means that the interest on all your other balances is still accruing, meaning you’ll owe more in the long term."
As Parker explains, this strategy is called the "avalanche method." Another option is to tackle the smallest debt first and work your way up. This would be the "snowball method."
6. Reach Out and Negotiate
If your debt has become so overwhelming that you're having a difficult time paying it back, contact the card issuer and try to negotiate a smaller amount. They will often be willing to work with you because they would rather receive payment than go unpaid and have to turn to collection agencies, which isn't ideal for you either. In your negotiations, you may be able to work out a smaller balance and/or smaller monthly payments.
In addition to the tips above, it can be helpful to consolidate high interest credit card debt. You can do this by taking out a personal loan (3). Check with Nevada State Bank to explore your options.
1. https://www.cnbc.com/2022/05/10/consumer-credit-card-debt-near-an-all-time-high.html
2. https://mint.intuit.com/blog/credit-cards/debt/
3. Subject to credit approval. Terms and conditions apply. See a banker for details.