You’ve probably noticed the APRs on your credit cards and other variable-rate debt creeping up as the Federal Reserve continues to raise interest rates. Since most credit cards have a variable rate, as the Fed raises the prime rate, your credit card rate will increase as well. The higher rate means paying even more interest on credit cards and other types of variable-rate debt. You will typically see the increase within a billing cycle or two. The rise in credit card rates has put a strain on many borrowers who carry a balance from month to month. This has many borrowers scrambling to find ways to pay down high-rate debt faster. Here are 5 clever ways to provide your own debt relief.
1 Pay more than the minimum payment
If you are only making the minimum payment on your credit card debt, you’re probably finding it impossible to make any progress in lowering the balance. You may only be covering the interest you are accumulating and not even making a dent in the principal. This doesn’t even take into account any new purchases you make. While making the minimum payments on a credit card can keep your account in good standing, it will end up costing you a lot more in accrued interest. This makes it tougher to pay down your balance in a timely manner. Paying down your balance also reduces your credit utilization ratio, which will improve your credit score. When it comes to making your credit card payments, think big rather than small. The more money you can put towards your payments, the less interest you will incur and the faster you will off your balance. This goes for high-rate loans as well. Make your required loan payment and then add some extra towards the principal.
2 Consider transferring high-rate credit card balances to a 0% APR balance transfer card
Transferring the balances of 20% APR credit cards to a 0% APR card can mean significant savings on interest. Many balance transfer promos offer a reduced rate for an introductory period of time. This set period gives you the opportunity to work on paying off as much of the principal balance as you can without accruing interest. Your goal is to pay off your balance before the end of the 0% introductory period. Choose wisely when selecting a balance transfer credit card. Look for one with a 0% APR and low or no fees. For example, Choice One Credit Union is currently offering a 0% APR* VISA Balance Transfer Credit Card on balance transfers up to 6 months. Consolidating to a Choice One balance transfer credit card gives a borrower 6 months to pay off or pay down the balance. Furthermore, the Choice One balance transfer card has no balance transfer fee and no annual fee.
3 Download and use a debt payoff app
Debt payoff apps such as Debt Payoff Planner or Qoins can help you prioritize paying down debt. Debt Payoff Planner and Tracker makes creating a debt payment plan simple with the goal of encouraging you to stay on track and pay down debt. The Planner guides you through the steps of assessing your current situation and developing a strategy to pay off debt. Qoins works by connecting to your financial accounts and setting up a payoff or savings goal. It enables you to set up an automated strategy based on how you would like to tackle your debt.
4 Consolidate high-rate variable debt with a fixed-rate personal loan
Another option for providing own high-rate debt relief is consolidating to a fixed-rate personal loan. Using a low fixed-rate personal loan to pay off high-rate credit card balances and smaller high-rate loans will provide you with one fixed installment payment to make each month. This can make the debt more manageable while at the same time saving you money on interest and hopefully helping you to get out of debt faster. If you are looking for a low-rate personal loan option, check out the personal loans at Choice One. Personal loan rates at Choice One are as low as 9.25% APR**, which is less than half that of the average credit card rate today.
5 Put all of your extra money towards debt payment
Finally, if you have some cushion in your budget and want to get out of debt, then rather than unnecessary spending, focus the extra on debt payment. When looking for ways to pay down debt, this is both smart and effective. It’s a great way to provide your own debt relief.
*0% VISA Balance Transfer Rate is valid for 6 billing cycles from date of transfer. Rate returns to current rate at that time. Choice One’s current Platinum Visa Credit Card Rate is 8.90% APR and Classic Visa Card is 13.50% APR with No Balance Transfer or Annual Fee. Balance Transfer offer is good on any new or existing Choice One Platinum or Classic Credit Card. 0% balance transfer rate is for balances transferred from another institution only. Transfers may not exceed the credit line a member is approved for.
**APR = Annual Percentage Rate. This rate includes .25% discount with Auto Pay and is for qualified borrowers.