Unfortunately, we live in a time when the average credit card rate is 16.9 percent. Sadly, this average rate is often charged even to those with great credit scores. At Interstate Associates, we have found that when rates are this high, many consumers get stuck in a cycle where they can barely make the interest rate payments each month.
Since travel can be very expensive, this is one of the major ways that consumers get into heavy credit card debt that becomes financially crippling. A NerdWallet study found that three-fourths of U.S. travelers expect to use their credit cards to fund this year’s vacation travel. The average cost of that travel will be $1,400.
If this sounds like you, and you have returned home to the sticker-shock of much higher payments due on your credit cards, the time is now to attack the problem and get some relief. Otherwise, you may end up having difficulty paying down the balance at all.
Get the Interest Rate Down
One of the first orders of business is to get your interest rate lower. There is no reason that anyone should be made to pay such exorbitant rates.
Ways to lower the interest rate on your credit card debt:
- Call the issuer and ask for an interest rate reduction
- Get a debt consolidation loan
- Get a zero percent balance transfer credit card
Let’s look at each of these.
Asking for the rate reduction from the issuer: This will possibly work if you have good credit with the card company.
Debt consolidation loan: According to Discover, this is a personal loan at a lower interest rate than your credit cards. It pays off your cards and leaves you with one payment at a lower interest rate. Then, you can make payments that will pay down the balance, so you can become debt-free.
You will need to not add more on your credit cards until the debt consolidation loan is paid off. If you just accrue more debt, you are going to make your problem worse. Thus, you will have to forego travel until you have saved cash to do so until the debt is paid off.
Balance transfer card: Discover advises that if you find a credit card with a zero percent interest rate, you can transfer the balance from the higher-interest cards to the one with the zero percent rate. This rate is usually good for 12 to 18 months. You will need to pay off as much as you can in that period of time in order to really attack the balance and pay the cards down.
Sell Some Items
Another means of getting the funds to pay down travel debt accrued on a credit card at a high rate is to sell some items on eBay or CraigsList. Of course, it is not guaranteed that you will sell your items. If you can, you might be able to get some of the balance on the cards down dramatically.
Take a Second Job
You may need to consider doing a side job in order to get your credit card debt whittled down.
Get Your Budget Down to Bare Bones
According to U.S. News, if you don’t already have a shoestring budget, you might consider eliminating all but essentials for a time until you can lower the balances on those cards considerably. Eliminating vices, such as alcohol and cigarettes can save an incredible amount of money each year, and it can save your health as well. Steer clear of places that might trigger impulse buying. Also, eat at home more. Dinners out are more expensive. All of these budget-cutting measures provide more money to pay down debt each month.
When your credit card debt is dramatically lower, you will not be laboring under high interest payments. This will provide relief in your budget, so you can start saving cash for your next vacation. Contact us at Interstate Associates with your questions about credit card debt. We are financial advisors, and we are always here to help.