The average American consumer now has $ 6,194 in credit card debt, according to Experian. This rose from $ 6,040 in 2018.
In November 2019, the average credit card APR was 14.87%, according to Federal Reserve data, but this includes interest-free accounts, such as the introductory rates of the APR 0%. If you’re only looking at accounts that are rated for interest, the average APR is significantly higher than 16.88%.
So the average American has $ 6,194 in credit card debt at an average interest rate of 16.88%. A rapid multiplication tells us that the average consumer pays $ 1,045.55 a year just for the privilege of owing money to his creditors. It’s over $ 1,000 that could be used to save on retirement, added to a emergency fund, or used for practically any purpose that is more productive for your financial health.
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Do you have excessive credit card debt?
There is no fixed number that qualifies as “too much” credit card debt. What one person would call an overwhelming debt burden could be a completely manageable amount for another. Having said that, most financial planners (myself included) are of the mindset that whatever the amount of debt you are paying a double-digit interest rate on is too much.
With that in mind, if you have a high interest credit card debt and are tired of your hard earned money going into your creditors’ pockets, here are two ways you could take control of the situation and put yourself on the path to freedom from that debt.
Balance transfers help you avoid interest
Competition in the credit card industry has never been higher and, consequently, there are some excellent offers on the market. Many of these offers are in the form of 0% APR balance transfers.
Here’s why this can help: Suppose you open a new credit card that offers a 0% APR on balance transfers for the first 15 months. By transferring your existing credit card debt to your new card, every penny you pay towards your credit card debt will be applied to principal, not interest, to get you out of debt faster.
Like I said, there are some great options when it comes to credit card balance transfer. Some have excellent reward programs, no annual fees and other benefits. It is normal practice to charge a small commission (e.g. 3% of the transferred balance), but there are currently some offers to transfer the balance without commissions on the market.
Personal loans can help manage larger amounts of debt
Balance transfers can be exceptional Self you can pay off the debt before the introductory period expires. However, this is not always the case.
Personal loans can be excellent debt repayment tools for consumers who want to keep their debt situation in check, but need a little more time than the APR 0% credit card period to transfer the balance.
Depending on the lender, personal loans can be obtained for amounts up to $ 100,000 and repayment terms of up to 72 months (or maybe more). Personal loans generally have fixed interest rates and, if you have good credit, you can probably find a lower APR than the credit card charge. With a personal loan, you can get a fixed monthly payment and a fixed repayment term for your debt. Also, since you will be using personal loan to pay off your credit cards, a personal loan can also be a positive catalyst for your credit score.
The bottom line
If you have thousands of dollars in credit card debt, you are not alone. However, if you are tired of paying hundreds or even thousands of interest to creditors month after month, there are some excellent options to help you keep your debt situation in check once and for all.
Motley Fool owns and recommends MasterCard and Visa and recommends American Express. We are firmly convinced of the Golden Rule, which is why the editorial opinions are ours alone and have not previously been reviewed, approved or approved by the advertisers included. Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts.
Motley Fool is a USA content partner TODAY that offers financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of the USA TODAY.
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