The pandemic was tough for everyone. Many people ended up having to borrow money when the economy was shut down.
If you built up $10,000 in debt on your credit cards to survive the pandemic, you need to explore your options for getting back on track.
Here’s how you can be proactive in dealing with your card balance so you can move on as quickly as possible.
Credit card debt can be hard to pay down because the interest rates are so high — an average 21.47% as of November 2024 — and minimum required payments so low.
It may be tempting to pay the bare minimum, but because minimum payments only cover interest and a little principal, it could take decades to become debt-free. Meanwhile, interest is compounding on your balance the whole time.
Don’t let that happen. Instead, try to reduce your interest rate by consolidating your debt into a personal loan or using a balance transfer credit card to pay off what you owe.
Balance transfer cards can offer a 0% introductory rate if you qualify for a special promotion, but you’ll usually have to pay a fee of around 3% to 4% to transfer your balance.
Still, this may be worth it if you can pay off the balance before the promotional rate ends.
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If you can’t consolidate your debt so you have just one monthly loan payment, you have the option of continuing to pay what you owe — with some tweaks.
Dave Ramsey recommends paying off the debt with the lowest balance until that’s done, then moving on to the debt with the next lowest balance.
This is called the debt snowball method, and Ramsey believes that you’re more likely to stick with your plan when you score quick wins by paying off debt with small balances right away.
Alternatively, send extra payments to the debt with the highest interest rate first before moving on to the next costliest debt until you’re done. This is called the debt avalanche method.
If you simply don’t have the cash flow to pay down your debt, you can try to negotiate a debt settlement with your creditors.
