When it comes to credit cards, it’s easy to lose track of your budget and run up a balance. In fact, the average credit card debt per cardholder in the United States is $4,061. If you have a high-interest credit card, your balance can grow over time, increasing your minimum payment and making it difficult stay on track.
If you’re struggling to afford your payments and pay down your debt, there are options available that can help. Here are three ways you can reduce your payment and get more breathing room in your budget:
1.Negotiate a Lower Interest Rate
High interest rates can cause your balance to balloon, but they can also cause your minimum payment to rise. One way to reduce the payment is to simply ask for a rate reduction.
If you’ve been a customer with your credit card company for a while, they may be willing to negotiate with you. Before you make the call, arm yourself with some research. Look up other credit cards with more competitive rates and be ready with that information. If you don’t know where to start, here’s a list of low-interest credit cards to choose from.
Once you’re ready, just look at your credit card and call the customer service number listed on the back of the card. When you are connected to customer service, tell them you found a new credit card with a much lower interest rate and you’re considering switching. Ask if they’d be able to adjust the interest rate to something more reasonable.
Companies do not want to lose your business, so chances are they will reduce your rate. Your new interest rate can result in a lower monthly payment. If you make extra payments, it can also help you become debt-free faster and save you money.
2.Transfer Your Balance
If you’ve racked up high-interest credit card debt, transferring the balance to a card with lower interest, or even a a card with a 0% promotional rate, can be a smart way to manage your debt. With the new rate, you can reduce your payments or accelerate your debt repayment, helping you save hundreds or even thousands.
If you have multiple cards with a balance, you can even transfer all of them onto one new card. This strategy can help you take control of your debt by simplifying your payments. Instead of keeping track of several cards and due dates, you’ll have just one. That benefit can help prevent you from missing payments.
Depending on your credit, you could get a 0% balance transfer for as long as 15 months, giving you time to dramatically reduce your debt.
3.Consolidate Your Debt
If you want to reduce your payments or your interest rates and end the credit card cycle, another option is to consolidate your debt with a personal loan. With this approach, you take out a loan for the amount of your credit card debt. If you have other forms of debt, such as medical bills, you can also include them in the personal loan as well.
The new loan will typically have a much lower interest rate than credit cards and have a set repayment term. With a personal loan, you’ll have an exact end date for when you’ll be debt-free, as long as you keep up with the monthly payments.
If you’re struggling to meet your current credit card payments, you can opt for a personal loan with a longer repayment term. A longer term will reduce your monthly payment. You’ll pay more in interest, but an extended repayment term can give you more wiggle room each month.
However, before signing up for a consolidation loan, it’s important to make sure you understand the terms of your loan and that you have a plan for repayment. Otherwise, you’ll return to your previous spending habits. In those cases, taking out a personal loan can exacerbate the problem.
If you decide to consolidate your debt with a personal loan, create a budget yourself and set up a payment and spending plan to stay on track.
Managing Your Credit Cards
If you’re overwhelmed with your credit card balance and are having difficulty making your minimum payment each month, don’t give up hope. There are options available to you that can reduce your payment and make your debt more manageable.
For more information about taking charge of your debt, check out this article on what you should know before doing a balance transfer.
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