The Best Ways to Get out of Credit Card Debt
CompareCards.com released its monthly credit card debt report that found the average credit card APR has increased to 15.54% — the highest in 20 years. At the same time (depending on where you go for information) the latest statistics show credit card debt has eclipsed 1 trillion dollars. Riddle me this - if interest rates are the highest in 20 years, shouldn't credit card balances be going the other way? If the economy and the job market are so good, why are Americans accumulating balances on cards with the highest average interest rate in the last 20 years?
A better question is this one- how do we get those rates lowered?
Home Equity Loan - Most people don't stop and consider that their mortgage balances have gone down and the appreciation on their home as gone up. This leaves room to borrow against the equity in your home at much lower interest rates. The key is to not take out the home loan any longer than you have to. The mistake people make is borrowing against their home and assuming long-term loans. Set it up to pay it off as fast as possible.
401 k loan - This is not my favorite option. However, if the interest rate is high enough, it might make sense. Just know the fine print head of time. Also remember you pay back the loan with after tax money. Thus, technically, you pay taxes on that amount twice in a lifetime.
0% Balance Transfers - Credit card companies are willing to transfer your balance over and charge you 0% for a period of time as long as 24 months. You might as well play the game of switching the balance from one 0% card to another once the interest rate changes. HOWEVER, you need to know ALL of the fine print. Credit card companies do these programs for a reason. They are in hopes that you will make a mistake and pay dearly for it. Don't get tripped up on the fine print. Really, nothing is free in the world of credit cards.
The key to getting out of debt is reducing the costs which are the interest rates. To get out of debt you have to be intentional and committed to getting out of debt the right way. Just paying minimum payments will just waste time and money!