Have you ever given it any thought as to how much of your hard-earned money – and your time – you are handing over to credit card companies for spending money you don’t have?
Based on US News & World Report’s recent listing of average credit card rates, 15.56% on the low end, 22.87% on the high end, my calculations are for an average of those two rates – 19.22%.
CNBC noted that the average credit card balance in the US is approximately $6,200.00.
Crunching these numbers in a credit card payoff calculator shows one would pay approximately $186/month as a MINIMUM payment.
How long would that take to pay off at that minimum payment amount while not charging another dime to the balance?
49 months.
Do you really want to spend just over FOUR YEARS of your life paying off a CREDIT CARD balance?
What’s worse, guess how much that 19.22% interest rate will cost you over that 49 months?
$2,731!
I don’t know about you, but I’d much rather have that money in my hands than to continue to be a slave to lenders!
[I realize not everyone with credit card debt is due to bad spending habits, but even when used as emergency funds, etc, credit cards are predatory.]
What to do to speed up payoff and pay less in interest to the card issuer?
Step 1: List out current balances, minimum payment requirements, and interest rates.
If you’ve been tracking your expenses and have started budgeting, use these numbers to help determine what you can decrease or cut to pay off the credit card balances faster.
Step 2: Take the total amount of the minimum payment(s) + anything you’ve freed up to start knocking out the balance(s) accrued. Three options at doing so are …
a) Pick a debt payoff strategy on this post – the snowball, avalanche, or some mix/hybrid. With credit card interest rates, the avalanche will ultimately save you more money in the long run. If you have cards with low balances (triple digits), this is probably the most cost-effective option.
b) Another option – with higher balances (four digits +) – is to do a balance transfer for as much as you can qualify for to a card with a 0% balance transfer offer (or a much lower interest rate). If you do this, determine a payment plan to zero out the BT’d balance before the rate increases at the end of the promo period. Also, be aware that you’ll pay a one-time 3-4% transfer fee (based on the amount transferred), but this is way cheaper than paying double-digit interest rates for months and years on end.
c) If a BT is not an option, call your credit card company up and see if they would be willing to lower the rate any amount while you pay the balance off. It’s possible they will consider doing so but may also freeze the account so that no new charges can be made.
Step 3: If you cannot free up enough money – or want to speed up the payoff faster, it is time to find extra money. Sell off items around your home you’re not using on Facebook Marketplace, Mercari, Poshmark, eBay, or any of the many other selling apps/sites out there. FB Marketplace and other apps that allow you to take cash payments for porch pickup will allow you to keep more towards payoff, but if you have high-value items, it’s worth considering selling online! Also, try to generate some side hustle income – this could be working a part-time job, doing secret shopping audits for apps like Field Agent, selling your talents (cookie making, tutoring, crafting, babysitting, pet walking, etc). Funnel every dime of the proceeds towards debt payoff.
