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Americans are no strangers to credit card debt. In fact, they are collectively due $ 807 billion in credit card debt, according to new research by The Ascent. The average US credit card balance, meanwhile, is $ 5,897, and while that may not seem like a huge amount, it is.
If you have a balance of $ 5,897 on a credit card If you charge 20% interest and it takes you five years to pay it off, you will spend a total of $ 3,477 in interest during that repayment period. That’s a lot of money to give up unnecessarily.
If you’re on a credit card balance similar to that of the average American, you’re better off paying that debt off quickly and efficiently. Here are some options you can consider for doing this.
1. Make a balance transfer
Transferring your existing credit card balances to a new card with a lower interest rate certainly won’t get rid of your debt, but it can make that debt less expensive to pay back. That way, you accrue less interest as you pay your new balance. Some balance transfer cards even offer an introductory rate of 0%, which will help you jump-start your debt.
2. Consolidate with a personal loan
While some balance transfer credit cards offer competitive interest rates, you may be paying even less interest on your debt with a personal loanA personal loan can be taken out for any reason, and if you have high credit, you may qualify for a rate as low as 2.49%. Once you get that loan, you can use it to pay off your credit card balances and then pay back that single loan in equal installments until it’s ready.
3. Do a cash-out refinance
If you have a lot of credit card debt and are a homeowner, a payout refinance may make sense for you. With a cash-out refinancing, you exchange your existing mortgage for a new one, only borrow an amount that is higher than your remaining mortgage balance. That extra money can then be used for any purpose, like a personal loan, so you can apply it to your existing credit card balances and just pay off your mortgage with a single monthly payment. Given the average refinance rate at the time of writing, it is 2.886% for a 30-year fixed mortgage and 2.461% for a 15-year mortgage, which is a much lower rate than what the typical credit card charges. (To be clear, these rates are generally reserved for borrowers with the highest credit scores, and if yours isn’t good, you may be charged a higher rate.)
Whether your credit card balance is higher or lower than the average American’s, the sooner you pay it off, the less money you’ll waste on interest charges. Plus, eliminating credit card debt is a great way to improve your credit score. So instead of complaining about your credit card balance, come up with the best solution to get rid of it once and for all.
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