3 Proven Ways to Reduce Credit Card Debt
The average credit card interest rate is 15.18% APR1. That’s high. It’s expensive to pay off revolving debt at that rate, and it takes a long time. Since the average American household in 2016 had $5,700 of credit card debt2, we wanted to share some of the best ways to reduce it — because a debt-free life is way less stressful.
Ask Your Card Issuer for a Lower Rate
Sometimes all you have to do is ask. If you have good credit and you’re a reliable, long-term customer, you may qualify for a cards with better rates, potentially savings you hundreds of dollars. You could even see if your issuer would match a lower rate you’ve been offered somewhere else. All it takes is one phone call.
How Much it Could Save You: A few hundred dollars
Transfer Your Balance to a New Card
If you have good credit, you could qualify for a low- or no-interest balance transfer. That means you could move your high-interest balance to a new credit card that charges a lower interest rate. Saving on interest would help you pay off your debt faster. With this method, it’s best to avoid making purchases on the new card — it only makes paying off the balance more difficult. You also have to watch out for transfer fees, and be aware that the low- or no-interest rate options will likely change to a standardized rate within 6-12 months.
How Much it Could Save You: $1,233.66
| Amount of Debt | Rate | Time to Pay Off | Total Interest Paid | |
|---|---|---|---|---|
| National Average | $5,700 | 15.18% APR1 | 182 months | $3,944.77 |
| Average Low Interest | $5,700 | 12.00% APR1 | 161 months | $2,711.11 |
Pay Off the Balance with a Personal Loan
To get an even lower rate, with lower monthly payments, and an earlier pay off time, you can use a personal loan. You get the money you need from the loan, pay off your high-interest credit card balance, and then make payments on your low-interest loan instead. This could save you A LOT.
How Much it Could Save You: $3,052.02
| Amount of Debt | Rate | Time to Pay Off | Total Interest Paid | |
|---|---|---|---|---|
| National Average | $5,700 | 15.18% APR1 | 182 months | $3,944.77 |
| Average Low Interest | $5,700 | 5.88% APR1 | 60 months | $892.75 |
Whatever method you choose, the best method will always be to control credit card spending to avoid more debt. As you know, that’s not always an option. If your credit card balance is piling up, a Personal Loan is a good option. For more information, you can check out this article “Is a Personal Loan Right for Me?” or learn more about our Connexus Personal Loans.
Disclosures
1 APR = Annual Percentage Rate. The national average credit card rate was 15.18% APR and the average low interest rate card was 12.00% APR on 12/7/16 according to www.creditcards.com. Based on monthly payments of 3% of the $5,700 in debt or a minimum of $15.
2 Average credit card debt numbers based on “Average Credit Card Debt in America: 2016 Facts & Figures” article on www.ValuePenguin.com (https://www.valuepenguin.com/average-credit-card-debt).
3 APR = Annual Percentage Rate. 5.88% APR is our lowest available rate as of 1/1/2017 for 60 months. 60 monthly payments of $19.28 per $1,000 borrowed. Minimum loan amount is $2,500. Other loan rates and terms available. Your loan is subject to approval and the rate may vary based on your individual credit, term and relationship level. Rate includes all available discounts. All loans are subject to approval and qualifications. Certain restrictions may apply. Offer not valid on tuition expenses and interest is not tax deductible. Offer subject to underwriting. Rates are subject to change and may vary based on your individual credit and relationship level. Offer does not apply to loans or credit cards currently financed at Connexus Credit Union. Offer subject to change or termination. Offer valid from 1/3/2017 to 2/25/2017.