If you have credit card debt, you aren't alone. The average American owes about $6,000 in credit card debt alone! This debt comes at a high price. Credit cards often come with a much higher interest rate than other types of loans, making our reliance on them an expensive habit.
In fact, Forbes reports that the average credit card interest rate is 20.4%, which, if you're like many of us, your balance of $6,000 can cost you $1,224 in interest in just one year! How can you get ahead?
Know your habits.
If you haven't already done so, start tracking your spending and look for "extra" areas where you can cut back - like coffee, shopping, movies out, and especially streaming or subscription services. Determine a realistic amount that you can apply to your credit card debt each month.
The WaFd Bank app is a good place to get started. It's got a few great tools (like Bubble Budgets) that come with your accounts to help you keep track of all your spending across all of your accounts - regardless of where else you bank or which cards you use. This way you don't have to go back and forth to see your balances and spending, and gives you a better idea of how well you're sticking to your budget.
Use cash before credit.
Credit cards can be a great way to improve your credit score and earn some extra rewards, like travel miles or cash back. But, if you've struggled managing credit cards in the past, then stick to a cash or debit-card only strategy for a year or so. You'll be amazed at how much you can save and how much easier it is to stay within budget.
Say "no" to store-branded cards.
They may sound like a great way to save, but the low introductory rate typically expires quickly and you're more likely to forget about the store cards. Loyalty cards are different, like the kind you can sign up for at the grocery store, just remember that if you have to give information like a your social security number it is not a loyalty card and you're likely applying for a store credit card.
Aim high.
This can be key if you have several cards with varying interest rates. Here's how it works: After you've determined how much money you can pay towards your debt each month, start paying that amount every month to the card with the highest interest rate. Continue to pay the same amount even as your minimum payment declines. After you've paid off one card, move to the card with the next highest rate and put as much as you can spare toward that debt.
Start with the snowball.
If you've got multiple cards with similar interest rates, then this is for you. Experts suggest that paying off a card completely, even if the balance is low, gives people a sense of satisfaction, accomplishment and motivation to continue to pay off debt. Take the amount that you determined you're spending each month to pay down the debt and start applying it to the card with the lowest balance. After that card's paid off, move to the next lowest balance.
Balance transfer with caution.
Many credit card companies will offer a 0% rate introductory rate if you transfer an existing card's balance to them. While this can be a good option for those who meet the qualifying criteria, it's also a dangerous game to play if you've struggled to conquer credit card debt in the past. In most cases that introductory rate will go up to the regular interest rate on your credit card after a certain period of time, usually one year. If you're curious, the average credit card interest rate in America is a whopping 20.4%!
Ask for help.
Sometimes credit card debt is more than anyone can handle without some help. Regardless of the reason - medical bills, loss of a job, death of a loved one - if you know you cannot meet your minimum payment, contact your credit card provider as soon as possible. Ignoring due dates and missed phone calls will not help. Some providers offer hardship payment plans to help you get back on track.
There are also government-approved agencies and nonprofits that can also help you to conquer debt. Check out the Federal Trade Commission's How to Get Out of Debt article for some great resources and advice on how to begin getting out of debt, as well as things to look out for and where to go for help.
Remember to do your research before you work with an organization; many debt settlement "companies" are nothing more than con artists who promise to negotiate and take away your debt in exchange for payment. Unfortunately, they will leave you with all of your existing debt, whatever fees you may have paid them, and a ruined credit report if you follow their "advice". The Federal Trade Commission's website has an article on signs of debt relief scams and advice on what to do if you're sued by a debt collector.
WaFd Bank is here for you.
Whatever your questions might be, we've got friendly and knowledgeable bankers ready to help! Visit your local branch or give us a call at 800-324-9375. If you'd like, you can also check out our checking accounts and everything we offer to help make your money work for you.