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Using a credit card regularly won’t necessarily lead to debt. But not paying your balance in full unfortunately will. Since credit cards charge a lot of interest, over time, even a small balance has the potential to grow into a large one.
If you’re sitting on a pile of credit card debt now, you’re not alone. Data from the Federal Reserve Bank of New York shows that U.S. credit card balances increased by $50 billion to a total of $1.13 trillion during the fourth quarter of 2023.
Carrying credit card debt has the potential to upend your finances. Not only might you be spending a lot of money on interest — money you could be using to meet other goals or pay other expenses — but carrying too much credit card debt could lead to a drop in your credit score. That could make it difficult — or expensive — to borrow money when you need to, such as to finance a car or buy a home.
The good news, though, is that with the right approach, you may be able to shed your credit card debt in relatively short order. Here are a couple of steps to take to rid yourself of that debt for good.
1. Consolidate your balances
Juggling multiple credit card balances can be burdensome. And you run the risk of forgetting to make a payment, which has the potential to cause a lot of credit score damage by itself.
That’s why consolidating your various credit card balances could be a smart move. And in that regard, you have choices.
First, you could look at a balance transfer. If you can move your various balances onto a single credit card with a 0% introductory rate, you’ll get some breathing room on the interest front as you work on whittling down your balance.
If that option isn’t appealing or available to you, you can also consolidate your credit card balances into a personal loan. The benefit of a personal loan is that you lock in a fixed interest rate on the sum you borrow, so your monthly payments will be nice and predictable. That could make them easier to incorporate into your monthly bills so you’re less likely to fall behind.
2. Join the gig economy
If you’re carrying credit card debt now, chances are, you don’t have hundreds of dollars each month to apply to your balance after paying your essential bills. If you did, your balance would probably be lower.
It’s hard to tell yourself you’ll cut back on spending to free up money for debt payoff purposes. Not only can surprise expenses pop up, but it’s hard to say no to the things you love.
Instead of pretending you’ll slash your spending to a notable degree — or pushing yourself to do that and being miserable — consider joining the gig economy long enough to make your debt go away. Once you’ve consolidated your debt to make it more manageable, find a second job you can fit into your schedule and use your earnings to pay that debt down. You may find that it’s not only easier, but also, more impactful than cutting back on small joys like morning lattes and takeout meals.
Given the way living costs have been rising, it’s not so surprising to see that U.S. credit card debt levels increased at the end of 2023. But the sooner you’re able to pay your debt off, the better your financial situation is apt to be.
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