Make these key moves sooner rather than later.
- Consumer interest rates could rise this year in light of actions taken by the Federal Reserve.
- If you owe money on your credit cards, it’s a good idea to pay off that debt as quickly as possible.
There’s a reason consumers are often urged to prefer personal loans to credit cards when the need to borrow money arises. Personal loans allow you to secure a fixed interest rate on your debt and pay it off in installments over time. Credit cards, on the other hand, allow you to transfer a balance, but the interest rate on your debt may change. And if your interest rate goes up, your debt becomes more expensive.
This year, there is reason to believe that consumer loans will be more expensive. The Federal Reserve has plans to raise its interest rates multiple times in 2022. And while the Federal Reserve doesn’t set consumer lending rates, it does tend to influence them.
That’s why now would be a great time to eliminate or at least reduce the credit card debt you already have. That is how.
1. Cut spending
If you have a credit card balance to remove, you’ll need money to do so. And now may be a good time to reconsider your spending and cut back on non-essential expenses. That could mean ditching the cord, ditching your gym membership, or even being more judicious about how you shop for clothes and food.
2. Get an extra hustle
The money in your paychecks can go a long way toward essential bills, like your car payment and rent. If that’s the case, a side hustle could be your ticket to reducing your debt fast. Since the money you earn from that second gig won’t go toward existing expenses, you should have the option to take all of it, minus what you owe in taxes, and use it to pay down your balances.
If you’re not sure which side hustle is right for you, try experimenting with a few different ones. You can drive for a ride-hailing service for a while and see if that gives you the income you want. Otherwise, you can look for something different, perhaps signing up for a grocery delivery app, entering data online from home, or taking care of pets while their owners are away.
3. Make a balance transfer
A balance transfer won’t reduce the amount you owe on your credit cards, but it might make it cheaper to pay off that debt. In general, a balance transfer will allow you to move your existing balances to a single card with a lower interest rate. In fact, many balance transfer offers come with a 0% introductory APR that lasts for a period of time. And if you can avoid racking up more interest on your debt, it should be easier to pay off.
Interest rates could rise over the course of the year, and that could make your credit card balances even harder to pay off. It’s a good idea to get ahead of interest rate hikes by reducing your debt as soon as possible. And these moves could make it easier to pay down that debt or, more ideally, pay it off in full.
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