HOUSTON – Analysts expect the Fed to raise interest rates again next week, possibly as much as a full percentage point, to help curb inflation. That means your credit card interest could go up again.
The average credit card debt is more than $6,000 and the average interest rate is more than 16%. One of the best things we can do to prepare for a possible recession is to pay off credit card debt.
RELATED: As inflation hits 9.1%, bigger rate hikes are possible, economists say
For tips to pay it off the fastest, we brought in Matt Schulz, Chief Credit Analyst for Lending Tree.
Schulz says your first step is to list your debts, how much you owe, and the interest rate you’re paying. And update your monthly budget to find the maximum money you can put toward debt.
“A lot of the assumptions you made about expenses six months ago have been blown out of the water by the way we’ve seen inflation explode in the last little while,” said Schulz.
MORE SULLIVAN’S SMART SENSE
You may want to use the Snowball Method, paying off the smallest debts first.
“The idea behind that is really about focusing on the psychology and the small wins first that will help you stay motivated,” explained Schulz.
Or use the Avalanche method, paying off the debt with the highest interest first.
“That’s really the way to get out of debt fastest, and ultimately reduce the amount of interest you’re going to pay,” he said.
RELATED: How to coupon for beginners, save on groceries during inflation
You can also transfer balances to 0% APR balance transfer credit card offers.
“Without accruing interest on a balance, that can reduce the total amount of interest you pay. But it can also reduce the amount of time that it takes to pay down that debt,” said Schulz.
Or consolidate debts in a personal loan or home equity line of credit with a lower rate. You can also ask your credit card company to lower your rate.
“70% of folks said they asked for a lower interest rate on their credit card in the past year and had gotten some help. And the average reduction was seven percentage points,” he told us. “That’s a big savings.”
You can check your credit score for free through many banks and lenders. You can watch it go up as you pay debt down.