Credit card interest rates have risen to unprecedented levels over the last decade. The average hovers around 23%. Credit card interest rates are at an all-time high. The average is hovering around 23 percent , and rates for retail store cards have reached more than 30 percent . The current economic climate has created a storm of debt for people with revolving credit card balances. continues to grow at rates that are overwhelming.
Credit card debt is on the rise due to economic pressures as well as changing consumer behavior. for example, while inflation is down from recent highs, the impact on everyday purchases continues, which leads many cash-strapped credit cardholders charge essentials like food and clothing to their cards. The average cardholder now owes nearly $8,000 in credit card debt. At today’s rate, this can quickly grow. Due to this, millions of credit card holders are trapped in a cycle of debt that is difficult to escape.
Debtors who are trapped in credit card debt have a number of debt relief options. However, consolidation of debt can be a viable option. Debt consolidation is a way to combine multiple high-interest loans into one, manageable payment. This can have both immediate and long term benefits. Choosing the right consolidation strategy, however, is crucial, especially with today’s economic climate.
Explore your debt relief options and consolidate your debt now .
3 credit card debt consolidation strategies worth considering now
These strategies could be useful if you are planning to consolidate credit card debt.
Sign up for a debt consolidation plan
If you have a high ratio of debt to income , or any other credit problems, debt consolidation may be the best option for you. For those who may not qualify for conventional lending, consolidation programs offered by reputable debt relief firms can be a viable option.
This type of program allows you to borrow money at a rate lower than that charged by your credit cards. The money you borrow is then used to pay off your credit card debt. You save money on interest and can streamline your payments. The lender will receive a monthly payment from you until the loan has been repaid.
These programs are different from the traditional debt consolidation program in some ways. Instead of working with a direct lender, money may be borrowed from a third-party lender partner. These lenders have more flexible criteria for lending than traditional financial institutions. This makes it more accessible to a broader range of borrowers.
Discover the debt relief options available to you today.
Transfer balances using a card with 0% APR
Transferring your high-rate debt to a new credit card with a 0% APR introductory period is a great way to save money if you have and a good or excellent credit score. These promotional periods range between 12 and 21 months. This gives you a good window of time to pay down your principal without incurring additional interest charges.
The strategy is best for people who are able to repay their debts aggressively during the promotional period, and also have enough discipline to not accumulate any new debts on their original credit cards. This strategy is best for those who can pay off their debts during the promotional period.
Remember that the majority of balance transfer cards will charge a fee. This is typically 3 to 5% on the transferred amount. The interest savings usually outweigh the cost. You should also have a plan to pay off the entire balance before the promotional rate ends, since interest rates usually jump after this period.
Use your home’s worth to repay high-rate debt
or the average level of home equity is now around $320,000. This means that many homeowners can use a powerful debt consolidation tool, if needed. Home equity loans and lines of credit have rates around 8% . This is much lower than personal loans which typically carry rates up to 12% .
Consolidating credit card debt using your equity can provide many benefits beyond a lower rate of interest. HELOCs, home equity loans and other extended repayment terms can lead to lower monthly payments. A fixed payment schedule provides structure and discipline in the debt repayment process.
This strategy is not without its risks, and you should carefully consider it before implementing it. It converts your unsecured debt to secured by your house. Missing payments can put your home at risk. This option is best for homeowners who have a stable income and a solid financial track record. You should also resist the urge to take on more credit card debt, since this could put you in an even worse financial situation.
The Bottom Line
There are several options you can consider if you wish to consolidate credit card debt. As you consider these options, don’t just think about the immediate relief that they may provide. Also, keep in mind their long-term effects on your financial health. Whatever path you take, it is important to realize that debt consolidation should form part of a larger financial plan. This includes developing sustainable habits of spending to reduce your chances of ending up in high-rate credit in the future.
