US household debt has just risen at the fastest rate since 2008, even as credit card rates have soared. Here are 3 ways to get out of debt sooner

US household debt has just risen at the fastest rate since 2008, even as credit card rates have soared. Here are 3 ways to get out of debt sooner

As inflation is gallopingAmericans are increasingly relying on credit cards to pay their bills.

And it’s starting to pile up. Credit card balances rose 15% from a year ago, growing at their fastest pace in two decades, according to the New York Fed’s third quarter report.

“With prices more than 8% higher than they were a year ago, it is perhaps unsurprising that sales are on the rise,” the Fed researchers wrote in a blog post.

However, with credit card interest rates hitting record highs as the central bank steadily raises the federal funds rate and experts are warning of an impending recession, it’s more important than ever to settle your debts. Here are three different strategies to help you forget about your debts.

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Consolidate multiple debts into one

If you have a balance on a few accounts, it can be easy to lose track of what you’ve paid and when. If you’re letting payments slip through the cracks, instead of letting interest accrue on your various lines of credit, you might consider a debt consolidation plan.

By taking out a new low-interest loan to pay off your various creditors, you can then focus on one payment on a big loan instead of juggling credit cards and loans with different maturities and balances.

Remember that you will often need a good credit score (at least 670) to qualify for a better interest rate than the one you are currently paying.

Try the snowball or avalanche methods

If it doesn’t make sense to consolidate your loans, there are a few other great techniques you can try to manage multiple debts.

The snowball approach suggests that you start by deleting the account with the lowest balance first. You will continue to make your minimum payments on all your other debts, but put any excess you have to tackle your most manageable debt first. This will help you build momentum before moving on to more difficult debts. But you also run the risk of racking up high interest on the more expensive loans in the meantime.

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At the other end of the spectrum is the avalanche method. This is when you start with the loan with the highest interest rate. This might be more helpful in saving you money in the long run, but it will also take you longer to see significant progress.

Negotiate with your lender

If your exorbitant interest rate is keeping you stuck in a cycle of debt, there’s no harm in contacting your credit card issuer and ask for a better deal.

Together you could come to a compromise, whether that means making them waive or lowering your minimum monthly payment, reducing the amount you owe in interest, reaching a forbearance agreement, or waiving the fees. past delays.

Some lenders may even agree to settle your debt directly with a lump sum payment.

Be ready to expose your financial situation and have your records handy. Chances are, your issuer is more likely to compromise and work with you rather than risk you missing out on the account and paying nothing.

Just make sure you’re able to meet the terms of the new plan before you agree to it – you don’t want to lose your creditor’s trust or add to your debt load.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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John A. Bogar