Like the 4-minute mile, often something feels impossible until someone accomplishes the seemingly impossible.  If you find yourself saddled with credit card debt and wondering what you can do about it, you may find hope in this post. Patty Moore from WorkingMotherLife.com discusses the 4 methods she used to fight her way out of crippling credit card debt.  I hope you’ll enjoy the post!

Déjà vu

For American consumers, it’s déjà vu. The Federal Reserve reported that outstanding credit card debt topped $1.021 trillion in June 2017, beating the previous record at the peak of the financial crisis in 2008. With revolving credit growing at an annual rate of 4.9% a year, it appears that the lessons learned from that catastrophic event have been forgotten.

Today 171 million consumers have access to credit.  That’s more than ever before in our history.  The younger generation is following in the footsteps of the debt-ridden Baby Boomer generation. It’s time for consumers to get serious about reducing their credit card debt lest they repeat the mistakes of the recent past. If you’re one of the tens of millions of consumers suffering from debt creep, here some actionable tips for paying down your credit card debt more quickly.

For some of us, credit card debt is an incredibly uncomfortable topic. At one point in my life, I was buried in a mountain of credit card debt split across three separate cards. Getting out of credit card debt is like running a marathon and not a sprint. (please note: I’ve never run a marathon)  With dedication to a budget, savvy financial decisions, side hustles, and support from friends and family you CAN get out of credit card debt. In this article, I want to highlight the actionable strategies I took to get out from under credit card debt.

1) Seek Relief from Your Credit Card Company

If high-interest rates are choking off your ability to pay down your credit card balance, you need to seek relief from your credit card company. A one point reduction in your APR means you could be paying less in interest charges each month and that difference can be applied towards your balance. Credit card companies are not opposed to negotiating rates, especially if you are a long-term customer in good standing. It also helps to mention that you’ve been offered a lower rate from a competitor. Credit card companies don’t like to lose customers because the cost of adding new customers is much more expensive than the cost of retaining one. Call your credit card issuer and make the case why you deserve a lower rate. The worst that can happen is they say no, but you won’t be any worse off.

2) Use a Balance Transfer Credit Card

If your credit score is high enough, you can probably qualify for a balance transfer credit card. Ideally, you can qualify for a 0% interest introductory rate that would allow you to transfer all or a portion of your high-interest debt and pay no interest charges for a period of time. The introductory period can be as long as 18 to21 months. If you go this route, you need to make sure you are able to pay off the balance transfer before the end of the promotional period; otherwise, your balance transfer will be charged the accumulated interest charges at the default interest rate – which could be higher than your current rate – for the entire introductory period. That has the potential to put you in an even deeper hole.

It is also important to know that, although you may be applying for an 18-month, 0% interest balance transfer, you may be issued a card with only a six-month introductory period with an 8% APR. Of course, that would be better than paying 21%, but you will need to pay the complete balance off before the end of the six-month promotional period. Otherwise, you will simply be kicking the can down the road. You also need to account for the balance transfer fee, which is typically between 3 and 5%. If you can qualify for a low rate, the fee is still a low cost of money when compared to the double-digit rate you are currently paying.

3) Use a Personal Loan

With the emergence of online lenders, consumers have much more access to low-cost debt in the form of personal loans. Personal loans are unsecured; meaning all it requires is your good credit to qualify. They are issued in amounts between $2,500 and $25,000 for one to five-year terms. The most creditworthy borrowers are charged rates as low as 4%, while borrowers with less than great credit may pay as high as 18%. If your credit score is less than 650, you may end up with a rate as high as your credit card APR. The average rate issued by industry leader, Lending Club, for borrowers with its top grade is 8.06%.

If you can replace 18% debt with 12% debt you could be better off. It is important to know that, because personal loans have fixed terms, your monthly payment could be higher than what you are paying on your credit card. However, if you can find the money in your budget, you will be paying down your debt much more quickly.

4) Use the Snowball Method

If you have multiple credit card balances and you are unable to qualify for a balance transfer or a personal loan, it’s time to put a serious repayment plan into action. A time-tested method for quickly paying down debt is the “snowball method.” The idea is to grow your debt snowball by focusing on your smallest debt first, working up to your largest debt. The idea is to build financial and psychological momentum as you tackle each credit card balance. While making minimum payments on your largest debt, you allocate the largest portion of your debt repayment budget to the smallest balance. After paying off the smallest balance you can redirect those payments to the next largest balance. By the time you get to your largest balance, all of your resources can be applied to getting you to the finish line. The method is designed to keep you focused on the most easily attained goals, building your motivation along the way as you continue to achieve your goals.

You’re next!

So now it’s your turn.  Take control of your money AND your life, it’s time to get to work paying off those credit cards!

Post by Patty Moore from WorkingMotherLife.com  You can find her on Twitter @WorkMomLife.