Paying down your credit card debt is a good New Year’s resolution

Carrying a balance has always been expensive, but now it’s particularly expensive.

The average credit card interest rate in mid-December was 19.42%, the highest rate since 1992. As the Federal Reserve Board continues to raise short-term interest rates to limit inflation, average rates they could increase even more, says Ted Rossman of credit card. analyst at, which tracks consumer loan interest rates.

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It’s not uncommon for consumers who are struggling to pay their bills to pay the minimum payment on their credit cards. But over time, paying the minimum will add thousands of dollars to the amount you owe.

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The average amount owed by cardholders who carry balances is $6,569, according to an analysis by LendingTree, an online loan marketplace. If you have a balance of that amount, your interest rate is 18%, and you only pay the minimum of $165 each month, it will take you five years to retire the debt and your total payments will exceed $10,000. (You can calculate your own numbers using Experian’s credit card payment calculator.)

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Over time, paying the minimum will add thousands of dollars to the amount you owe.


If you have good to excellent credit, one option is to apply for a balance transfer card with a 0% intro fee. Wells Fargo, Bank of America and Citibank offer balance transfer cards with a 0% fee for up to 21 months, Rossman says. Most charge a transfer fee of 3% to 5% of the balance.

Once the introductory period ends, the interest rate will increase to the card’s normal rate, which could be even higher than the rate you were paying before the balance transfer. Ideally, you should try to pay off most or all of your balance before this happens. Divide the amount you owe by the number of months in the balance transfer period to get an idea of ​​how much you should try to pay each month. Resist the temptation to add to your credit card debt, even if you get offers for 0% interest on new purchases, Rossman says.

If you own a home, another option is to use a home equity line of credit to pay off your credit cards. According to, the average rate on a home equity line of credit is 7.3%, and you typically have up to 20 years to repay the loan.

But before you borrow against your home, make sure you can afford the payments if the economy goes south, says credit expert Gerri Detweiler. “If you fall behind on payments, you’re putting your home at risk.”

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Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on these and similar money topics, visit


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