If you have credit card debt, you’re not alone: Americans owe a record $1.08 trillion on their cards, according to credit reporting agency Experian, with the average balance exceeding $6,300.
Carrying a large balance increases your debt load, hurts your credit score, and negates any benefits you get from your card’s rewards plan. And with credit card interest rates at record highs, it may be harder than ever to get out from under them.
Below, CNBC Select reviews the best ways to eliminate your credit card bills, whether you have one card or a full wallet.
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Using a balance transfer credit card
You can avoid crushing interest rates by transferring high-interest card debt to a balance transfer credit card that has no interest for up to two years.
Protagonism
Get 0% introductory APR for 21 months on balance transfers and 12 months on purchases.
Good to excellent 670–850
The Citi Simplicity® Card may not earn rewards, but it can still save you money thanks to its amazing introductory APR offers.
One of the longest APR introductory offers for balance transfers No annual fee No rewards No welcome bonus
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No late fees, no penalty fee and no annual fee… Ever0% intro APR for 21 months on balance transfers from the date of the first transfer and 0% intro APR for 12 months on purchases from the account opening date. After that, the variable APR will be 18.49% to 29.24%, depending on your creditworthiness. Balance transfers must be completed within 4 months of account opening. There is an introductory balance transfer fee of 3% of each transfer (minimum $5) made within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5). Stay protected with Citi® Quick Lock
Balance transfer fee
There is an introductory balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Foreign transaction fee
Wells Fargo Reflect® Card
In Wells Fargo’s secure site
rewards
Welcome bonus
Annual fee
Introduction APR
0% introductory APR for 21 months from account opening on eligible purchases and balance transfers.
regular APR
17.24%, 23.74% or 28.99% variable APR
Balance transfer fee
Foreign transaction fee
Credit required
Pros
Best-in-class introductory APR on qualifying purchases and balance transfers No annual fee Mobile phone insurance
Cons
No Rewards No Welcome Bonus High Balance Transfer Fee
There are some limitations to this strategy: balance transfer cards usually have limits on the amount you can transfer, and you can’t transfer a balance between cards issued by the same bank. Also, you’ll need a FICO credit score of at least 670, which is considered good or excellent.
Be sure to read the fine print before requesting a transfer.
Debt consolidation with a personal loan
If you don’t want to add another credit card, a personal loan provides you with cash for a set period and usually at a fixed interest rate lower than a credit card’s APR.
Depending on your credit score, you may qualify for a loan that covers all of your credit card debt. And if your debt is spread across several cards, consolidating it into a personal loan will be easier to manage.
CNBC Select ranked Happy Money as one of the best choices for a personal loan. If you don’t have a great credit history, applicants only need a fair credit score (580 or higher) to qualify for a loan.
happy money
Annual Percentage Rate (APR)
Purpose of the loan
Debt consolidation/refinancing
Loan amounts
terms
Credit required
Quota of origin
1.5% to 5.5% (depending on credit score and application)
Early payment penalty
Late fee
Pros
Peer-to-peer lending platform makes it easy to check multiple offers Loan approval includes Happy Money membership and customer support.
Cons
Higher loan minimums ($5,000) Soft inquiry required for origination fees and other details
How Payoff is designed to help you stay motivated:
It offers borrowers a dedicated “Science of Empowerment” team available to answer questions and offer encouragement. Free personality tests, stress assessments and cash flow trackers to help borrowers understand their money management style and get into better habits. Free FICO Tools help members track their progress*
* According to a study of Happy Money members between February 2020 and August 2020, members who use a Happy Money loan to eliminate at least $5,000 in credit card balances see an average FICO score increase of 40 points. (Results may vary and are not guaranteed.)
LightStream is another attractive option if you’re trying to pay off high-interest credit cards thanks to its low APRs. You’ll need a FICO credit score of at least 670, but LightStream doesn’t charge late or origination fees.
LightStream personal loans
Annual Percentage Rate (APR)
6.94% – 25.29%* APR with AutoPay
Purpose of the loan
Debt consolidation, home improvements, auto financing, medical expenses and more
Loan amounts
terms
From 24 to 240 months* depending on the purpose of the loan
Credit required
Quota of origin
Early payment penalty
Late fee
Conditions apply. *The AutoPay discount is only available before the loan is funded. Rates without AutoPay are 0.50% higher. Excellent credit is required for the lowest rate. Rates vary according to the purpose of the loan.
Pros
Same day funding available via ACH or wire transfer (terms apply) Loan amounts up to $100,000 No origination fees, no prepayment fees, no late fees LightStream plants a tree for every loan
Cons
Requires several years of credit history No option to pay your creditors directly Not available for student loans or business loans No option for website pre-approval (but pre-qualification is available on some third-party lending platforms)
Borrow money from family or friends
If your credit score is below 580, you may have a hard time qualifying for a balance transfer card or personal loan.
If you’re thinking of borrowing from a family member or friend, make sure you set up a repayment plan before you borrow money. And follow it like you would a bank loan so you don’t risk damaging your relationship.
Pay off high interest debt first
If you have debt from multiple cards, it’s a good idea to use the avalanche method: pay off the balance on the card with the highest interest rate first, then work your way through the remainder with the highest APR lower
You can also combine techniques by opening a balance transfer card with a 0% introductory APR. First, clear any lingering balances on your high-interest cards and pay the minimum on your balance transfer card.
Once the high interest card is paid off, approach your balance transfer card more aggressively.
Likewise, if you’ve consolidated debt with a personal loan or a loan from family or friends, prioritize paying off high-interest balances first.
Pay the smallest balance first
Then there’s the snowball repayment method, which involves paying off the card with the smallest balance first and building up as you go.
The theory is that reducing a card balance to zero provides a sense of accomplishment and encourages continued debt management. Financial advisors typically don’t recommend the snowball method because it can lead to more interest charges compared to paying off high-interest cards first.
At the end of the day, the most important thing is to create a debt repayment plan that you can stick to. If paying off a card with a lower balance will keep you on track, it may be the right choice for you.
If you decide to use the snowball method, you should still make the minimum payments on your other cards.
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bottom line
Credit cards are a necessity in today’s world, and they can be an asset if you budget well and pay off the balance each month. However, if you find yourself buried under credit card debt, there are options that give you more time to pay it off with less interest.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality journalistic service and comprehensive consumer advice so they can make informed decisions with their money. Each review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. Although CNBC Select earns a commission from affiliate partners on many offers and links, we create all of our content without input from our commercial team or outside third parties, and we pride ourselves on our journalistic standards and ethics.
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