“When it comes to credit card debt, I’ve been there, done that. As in 5-figure debt,” Suze Orman recently wrote on her blog. But she says, if you find yourself in a similar situation, you can remedy it: “You must recognize that this is the biggest fork in your road to financial freedom. Get control over your spending today and you will have a much better future. Let it slide and you will likely make credit card debt a chronic part of your financial life, which is going to make it hard to build any sort of financial security,” says Orman. So how do you dig yourself out of credit card debt — and keep from getting in it again? Here are some of the options pros say are smart.
0% balance transfer credit card (and repay it in a timely manner)
For his part, Ted Rossman, senior industry analyst at CreditCards.com, says there are plenty of good debt payoff strategies. “For example, signing up for the right 0% balance transfer card can be an excellent way to avoid high credit card interest rates for nearly two years,” he says. “You can move your existing high-cost debt over to a new card with an interest-free promotion lasting as long as 21 months.” Here are three of the best balance transfer cards, and a full list is here:
- Citi® Double Cash Card, which offers 0% on balance transfers for 18 months (then 18.49% – 28.49% variable APR), plus cash rewards that let you earn unlimited 1% cash back on all purchases, plus an additional 1% as you pay for those purchases.
- Capital One SavorOne Cash Rewards Credit Card, which offers 0% on balance transfers for 15 months (then 19.24% – 29.24% variable APR), plus 3% cashback on dining, entertainment, various streaming services and purchases at grocery stores, and 1% on all other purchases.
- Citi Simplicity® Card, which offers 0% on balance transfers for 21 months (then 18.49% – 29.24% variable APR), which is one of the longest 0% periods available.
“Reducing your interest could make a substantial impact on your payoff timeline,” says Autumn Campbell, certified financial planner at Facet Wealth. That said, you need to pay off the balance in full before the 0% offer expires or you’ll face high interest again.
Get a low-rate personal loan
If you don’t qualify for a balance transfer card, taking out a personal loan to pay off multiple debts can be helpful because these loans often charge lower interest rates than credit cards do. “Consider a low-rate personal loan as a form of debt consolidation if you have good credit,” says Rossman. See some of the best personal loan rates you can get here.
“Instead of ever-changing monthly payments on your cards, you have just one equal monthly payment for a set period of time which can be a lot easier to budget for,” says Sara Rathner, credit card expert at NerdWallet.
All that said, you must pay this loan in full and on time or you risk dinging your credit score and ending up in even more debt.
Double down on a payoff strategy that works for you
Experts recommend paying as much as you can each month to pay your balance off quicker and therefore dodge unnecessary interest payments. You can pay off the account with the lowest balance first, while continuing to pay the minimums on all other accounts; or pay off highest interest debts first, while making the minimum payments on the rest. This article dives deeper into that.
Say ‘no’ to buy now, pay later
Orman says opting into buy now, pay later features can exacerbate one’s debt. “Surveys show that people end up buying more when they use BNPL because their upfront cost (typically just 25% of the purchase price) is so low,” says Orman.
Use debit cards instead of credit cards
Orman recommends keeping credit card usage to a minimum, save for a recurring charge or two, and instead using automatic bill pay through your checking account. “For all other spending, use a bank debit card and turn off any option to have overdraft protection,” says Orman.
Sign up for a debt management plan
Debt management plans offered by reputable nonprofit credit counseling agencies like Money Management International can help you pay off your debt at a much lower interest rate, says Rossman. “Additional benefits include that you don’t necessarily need great credit and they can provide you with helpful advice along the way,” says Rossman.
Build an emergency fund to cover costs so you don’t have to use your credit card
“The best way to avoid putting emergency expenses on a credit card is to have a separate emergency fund account,” says Bobbi Rebell, certified financial planner and author of Launching Financial Grownups. The good news with that one is that many high-yield savings accounts are now paying more than they have in over a decade. See some of the highest savings account rates you can get here.
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