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

Carrying a balance has always been expensive, but now it is especially 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 quell inflation, average rates could rise even higher, according to Ted Rossman, credit card analyst for, which tracks interest rates for consumer loans.

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

The average amount owed by cardholders who carry a balance is $6,569, according to analysis by LendingTree, an online loan marketplace. If you carry 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 pay off the debt, and your total payments will reach $10,000. (You can calculate your own numbers using Experian’s credit card payout calculator.)

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Over time, making the minimum payment 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% introductory rate. Wells Fargo, Bank of America and Citibank offer balance transfer cards with a 0% rate for up to 21 months, Rossman says. Most charge a transfer fee of 3% to 5% of the balance.

Once the introductory period is over, the interest rate will increase to the card’s regular 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 the 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’re a homeowner, another option is to use a home equity line of credit to pay off your credit cards. The average rate for a home equity line of credit is 7.3%, according to, and you typically have up to 20 years to pay off the loan.

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

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Sandra Block is the senior editor of Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit

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