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As Americans continue to grapple with mounting credit card debt, finding effective ways to tackle it becomes more and more pressing. After all, credit card interest rates have soared to unprecedented levels over the last decade, with the average now hovering around 23% — and retail store card rates have been pushed even higher, averaging more than 30% currently. This challenging environment has created a perfect storm for those carrying revolving balances, as their debt continues to compound at rates that can quickly become overwhelming.
The trend of growing credit card debt reflects both economic pressures and shifting consumer behaviors. For example, while inflation has cooled compared to recent highs, it continues to impact the prices of everyday purchases, leading many cash-strapped cardholders to charge these essentials to their credit cards. That has led to the average cardholder owing nearly $8,000 on their credit cards — a debt burden that can grow quickly at today’s rates. As a result, millions of cardholders are now trapped in a cycle of compounding debt that’s tough to dig out of.
Those trapped under the weight of their credit card debt have numerous debt relief options to consider, but debt consolidation, in particular, can offer a viable path forward. By combining multiple high-interest debts into a single, more manageable payment — typically at a lower interest rate — debt consolidation can provide both immediate and long-term benefits. However, choosing the right consolidation strategy is essential, especially in today’s economic landscape.
Explore your debt consolidation and other debt relief options now.
3 credit card debt consolidation strategies worth considering now
If you plan to consolidate your credit card debt, these strategies may be worth a look:
Enroll in a debt consolidation program
Debt consolidation can provide hefty relief from your high-rate debt, but you’ll have to qualify for a loan first — and that can be difficult when you’re dealing with a high debt-to-income ratio or other minor credit issues. So for those who might not qualify for traditional lending options, debt consolidation programs through reputable debt relief companies can offer a viable path forward.
When you enroll in this type of program, you borrow money with a loan at a lower rate than your credit cards, and that money is used to repay your credit card debt, cutting down on interest charges and streamlining your payments. You then make one payment to the lender each month until the loan is repaid.
That said, these programs differ from traditional debt consolidation in certain ways. For example, rather than working directly with a lender, the money is borrowed from one of the debt relief company’s third-party lender partners. You’ll still have to qualify, but these lenders typically have more flexible lending criteria than conventional financial institutions. That makes this option accessible to a wider range of borrowers.
Explore the credit card debt relief strategies available to you now.
Transfer your balances with a 0% APR card offer
If you have a good to excellent credit score, transferring your high-rate credit card debt to a new card offering a 0% introductory APR can provide significant savings. These promotional periods typically range from 12 to 21 months, offering a valuable window to make meaningful progress on paying down principal without accruing additional interest charges.
This strategy works best for those who can commit to aggressive debt repayment during the promotional period and have enough discipline not to accumulate new debt on their original cards. It’s particularly suitable for those with debt amounts that can realistically be paid off during the introductory period, as this eliminates any further compound interest from the equation.
Keep in mind, though, that most balance transfer cards charge a transfer fee — which is usually 3% to 5% of the transferred amount. That said, the interest savings typically outweigh this cost. It’s also important to have a plan for paying off as much of the balance as possible before the promotional rate expires, as the interest rates will typically jump significantly after the promotional period ends.
Leverage your home’s value to pay off your high-rate debt
With the average home equity level now sitting at about $320,000, many homeowners have access to a potentially powerful debt consolidation tool if they need it. Right now, both home equity loans and home equity lines of credit (HELOCs) have average rates of about 8%, which is significantly lower than the 12% or higher rates that typically come with personal loans, another common debt consolidation vehicle.
Using your home equity to consolidate credit card debt can also provide several advantages beyond the lower interest rate. For example, the extended repayment terms that come with HELOCs and home equity loans can result in lower monthly payments. Having a fixed payment schedule can also provide structure and discipline to the debt repayment process.
However, this strategy requires careful consideration before you utilize it, as it converts your unsecured credit card debt into debt secured by your home. As a result, missing payments could put your property at risk, making this option best suited for homeowners with stable incomes and solid track records of financial management. It’s also important to resist the temptation to rack up new credit card debt after consolidating, as this could leave you in a worse position than before.
The bottom line
If you want to consolidate your credit card debt, there are a few solid options to consider now. But as you evaluate these options, remember to consider not just the immediate relief they might provide, but also their long-term implications for your financial health. And whatever path you choose, it’s important to understand that debt consolidation should be part of a broader financial plan — one that includes developing sustainable spending habits to reduce the chances of finding yourself in high-rate debt in the future.