Emerging from the COVID-19 pandemic, Americans are seeing higher levels of credit card debt - but their spending isn't slowing down. Here's how you can pay down your credit card debt. (iStock)
The coronavirus pandemic unequivocally placed Americans under economic and social strain. However, arguably the most impactful stress many people felt was within their finances.
In fact, according to a new survey, more than half of Americans (62%) said that their credit card debt increased compared to before the global pandemic began. Additionally, 52% of respondents said that they increased their credit limits to support their increase in spending.
But even as debt rises, cardholders’ spending habits are not slowing down, and overall sales are increasing in many industries. In June, the Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics (BLS) surged 0.9%.
If you took on debt during the pandemic, consider taking out a personal loan while interest rates are low to pay down high-interest debt. Visit Credible to compare multiple lenders at once and see personal loan options like a debt consolidation loan to pay down credit card balances.
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How to pay off debt quickly
While many credit cards offer 0% annual percentage rate (APR) introductory periods, once they start collecting interest, they can create a major strain on finances. The average minimum credit card interest rate is 15.56%, and can be as high as 22.87%, according to U.S. News.
If you're looking to get out from this high-interest debt, here are three quick ways to start:
1. Take out a personal loan: Interest rates on personal loans are decreasing, down to 10.97% for the week of July 12 for borrowers with good credit scores of 720 or higher. Some personal loans can see much lower rates, too. Taking out a personal loan can be a viable option toward debt consolidation, but be sure to conduct thorough research in order to select the right one for your specific financial needs.
If you have credit card debt and want to pay it down, consider a personal loan to get on a repayment plan to become debt-free and lower your payments toward credit card companies’ highest interest rates. Visit Credible to get started seeing your debt relief options and get pre-approved with a creditor in minutes without receiving a hit to your credit report.
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2. Balance transfer credit card: While using a credit card can be a quick and simple way to make a purchase, they come with strict terms and can sometimes cause significant financial stress.
The survey revealed that 64% of respondents felt stressed about high interest rates, 47% felt the same about annual fees and 25% were concerned about their ability to make monthly payments. A balance transfer credit card can alleviate some of this stress, as it usually gives an introductory period of about six to 18 months with 0% interest, allowing cardholders to pay down debt quickly without accruing interest.
Whenever you're considering opening a new credit card, make sure you visit a site like Credible so you can view and compare all of the rates, fees, and perks being offered by card type.
3. Cash-out mortgage refinance: Amid Americans' increased spending, 30% of survey respondents said they're purchasing things they need, rather than things they only want. And 65% said they're making purchases with a credit card that they don’t currently have the funds for.
Surging home prices have given homeowners the opportunity to borrow against the equity they've already built in their home, taking out home equity lines of credit to pay down high-interest debt and consolidate monthly payments. Cash-out mortgage refinancing offers a variety of benefits like lower rates and possible tax deductions, but it's important to be aware of closing costs involved and the potential added cost of private mortgage insurance.
If you are struggling to make your payments, consider taking out a low interest rate cash-out refinance to help with your credit card high balances and lower your monthly payments by consolidating high-interest credit card debt. Visit Credible to compare your options.
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