Kiplinger’s Personal: Master Your Credit Card Debt | Economic news

Revolving credit, which includes credit cards, jumped 21.4% in March, according to the Federal Reserve. But at the same time that credit card debt is on the rise, rising interest rates have made maintaining a balance more expensive.

If you have credit card debt, consider these strategies to eliminate or reduce what you owe.

Take stock of your debt. If you have balances on multiple credit cards, make a list showing how much you owe on each card, the interest rate, and the minimum monthly payment for each. A spreadsheet is a handy way to update your progress, but pen and paper work just as well.

If you have a good credit rating, a balance transfer could help you get out of debt.

Many banks offer balance transfer cards to new customers with an introductory 0% APR for a limited time – ranging from 12 to 21 months, depending on the card. To avoid interest, pay the balance before the introductory rate expires.

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This strategy only works if you resist the temptation to use the balance transfer card to make new purchases, said Beverly Harzog, author of “Confessions of a Credit Junkie.” You want to use the card to get out of debt, not add more, she says.

If your credit score isn’t high enough to meet the criteria for a 0% introductory rate on a balance transfer card, you may qualify for a card with a lower-than-rate introductory APR. your current card, Harzog said.

Another option is a debt consolidation loan from a bank or credit union with a lower rate than the rate you pay on your high-interest credit cards.

Put profitability strategies to work. When you have balances on multiple credit cards, there are three approaches you can take to tackle the debt.

The first is the “avalanche” approach. Start with your cards that have the highest interest rates and highest balances. Make minimum payments on low-interest cards while devoting the rest of your available funds to high-interest cards.

Although the avalanche approach makes the most mathematical sense, some people choose the “snowball” approach, which works by paying off low-balance debt first. Paying off your low-balance cards can give you the motivation you need to pay off all your debt, even if it costs you more in interest.

Finally, there is the “blizzard” approach, in which you start with the snowball and move on to the avalanche. Pay off a low balance card first so you have a hit under your belt, then move on to ones with higher rates.

Paying off your balances will make it difficult to save. But try to set aside enough money in an emergency fund to cover three months of expenses.

When you have paid off your debts, you can increase your savings so that you are prepared for unexpected expenses, which will reduce the risk of falling back into debt.

Emma Patch is an editor at Kiplinger’s Personal Finance magazine. To learn more about this and similar money-related topics, visit Kiplinger.com.

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