Credit card rates are near record highs. Here are 3 quick ways to get rid of your card debt now.
Credit card rates have been on an upward trajectory recently. According to the latest Federal Reserve G.19 consumer credit report, issued this week, the average credit card rate surged to 22.76% in May, up from 22.63% in Q1 2024. That leaves the average card rate hovering near the record set in 1994.
High credit card rates can be detrimental to cardholders, especially those who carry a balance from month to month. After all, interest charges compound rapidly, and as your balance grows, your credit card debt can become increasingly difficult to manage.
And, we're likely already witnessing some of the repercussions of today's high-rate credit card environment, as maxed-out credit cards and payment delinquencies have also been increasing recently. So, if you're carrying a balance right now, it's crucial to address your credit card debt promptly.
Dealing with high-rate card debt? Explore your top debt relief options now.
3 quick ways to get rid of credit card debt now
If you want to tackle your card debt now, these options could be worth considering:
Credit card debt settlement
With credit card debt settlement, also known as credit card debt forgiveness, the goal is to negotiate with creditors to try and pay less than what you owe in return for a lump-sum payment. Any remaining portion of your balance is then written off by the credit card company.
In turn, debt settlement can be a quick path to getting rid of your card debt for less than what you owe. However, you should know that it typically negatively impacts your credit score. And, the forgiven portion of your balance is considered income by the IRS, so you'll typically owe taxes on that amount.
You can try to settle your debt on your own or use a debt relief company to facilitate the process. For many borrowers, a debt relief company makes sense, as they provide professional negotiation skills and also serve as a single point of contact for multiple debts, which can simplify the process. Their services come at a cost, however, with fees typically ranging from 15% to 25% of enrolled debt.
Compare your debt relief options and find the best approach to your high-rate card debt here.
Debt consolidation
When you consolidate your debt, you combine multiple debts into a single payment using a loan, ideally at a lower rate than your credit cards. By consolidating your debt, you can streamline your payments and significantly reduce the amount of interest you owe. That makes it easier and cheaper to pay off what you owe.
There are a couple of ways to approach debt consolidation. One is to take out a debt consolidation loan or another type of loan (like a home equity loan or a personal loan) through a bank or credit union and use it to pay off multiple debts.
You can also work with a debt relief company to obtain a debt consolidation loan through one of their lender partners, which could be a good solution for borrowers who have a few negative marks on their credit reports, as there may be more flexibility in terms of borrower requirements.
Balance transfer
A balance transfer is another option you have for getting rid of your high-rate card debt quickly. With a balance transfer, you move your existing card balances to a new card with a lower or 0% introductory interest rate. This vastly reduces or removes interest charges for a certain period, leading to significant savings during the promotional period and letting you pay down your balances faster.
It's worth noting, though, that you usually need good to excellent credit to qualify for the best balance transfer offers. And, most cards charge a balance transfer fee, which is typically 3% to 5% of the transferred amount, which should be factored into your calculations. You'll also have to pay interest on any remaining balance after the promotional period ends.
Which debt relief option is right for you?
When considering your debt relief options, it's essential to assess your specific financial situation carefully. For those with good credit and the discipline to avoid new debt, a balance transfer or debt consolidation loan might be the most cost-effective solution. These options can provide immediate relief from high interest rates and a clear path to becoming debt-free.
If you're struggling with a large amount of debt and having difficulty making minimum payments, debt settlement might be worth considering. Just be aware of the potential impact on your credit score — and the potential fees involved if you work with a debt relief company.
The bottom line
Regardless of the method you choose, the key to getting rid of your high-rate card debt is to act quickly. With credit card rates approaching record highs, every day of inaction could make your debt more challenging to manage. But by taking steps to address your credit card debt now, you can protect your finances and work toward a debt-free future.
