Most people who use credit cards realize that it’s in their best interest to pay off their debts as soon as possible. They understand that if they don’t, interest accumulates and they’ll need to pay along with the balance.
At the moment, though, it’s more urgent than usual to pay off your credit card debt because of the threat of a recession. You might use a credit card consolidation calculator if you have a high enough credit score for a lending entity to offer you a personal loan. If that’s not realistic, you’ll need to look into other ways to pay off your outstanding debt as fast as possible.
In this article, we’ll talk about why paying off your credit card debt is more pressing than normal. We’ll also discuss the best ways to do it.
Why the Urgency to Pay Off Credit Card Debt?
It’s crucial to pay off credit card debt right now because the Fed recently raised the interest rates. The Fed, also known as the Federal Reserve System, is America’s primary banking entity. It can raise interest rates, as well as regulate financial markets.
When the Fed raises interest rates, it often means a recession is imminent. A recession is when there’s a steep decline in economic activity.
For a credit card user, the reason this matters is that you’ll need to charge more on your card to pay for the same goods and services that did not cost as much in previous years. Also, when the Fed hikes interest rates, credit card companies are liable to raise their rates as well, just like banks and credit unions.
These factors combined should incentivize paying off your outstanding credit card bills as fast as possible. Let’s talk about some ways to do that.
1. Use Other Payment Methods
One way to make it easier to pay off outstanding credit card bills is to stop using your cards as payment methods. You can often pay your rent or other bills with cash, a check, or a money order.
By doing so, you avoid spending with your credit card. There’s no risk of you being unable to pay off the balance at the end of a billing cycle, and the companies can’t charge you any interest.
2. Stick to a Payment Plan
You can also make a payment plan and stick to it. You can use the popular avalanche method, paying off cards with the highest interest rates first before moving on to ones with lower rates.
You may also try the snowball method, where you pay off the smallest balance before moving on to the larger ones. Both approaches have a history of success.
3. Get a Balance Transfer Card
You might get a balance transfer credit card if you have a high credit score. You can transfer any high-interest credit card debt to the new card.
If it has a 0% APR introductory offer, you will owe no interest on that debt, usually for six months or a year. You can take that time to pay off the debt without worrying about the interest piling up.
Now’s the Time to Pay Off Credit Card Debt
Some economists see the Fed raising interest rates as an ominous sign. They feel that a recession could be near. Because of this, it’s wise to pay off any outstanding credit card debt as quickly as you can.
You can get a balance transfer credit card if you have a respectable credit score. If your card comes with a 0% APR, that eliminates any interest you’ll owe on the balance, at least for the introductory period.
You might use the snowball or avalanche methods to pay off your existing credit card debt. You can also avoid using your credit cards and utilize other payment methods. These strategies should get you on stable financial footing if a recession occurs.