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

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

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 reduce inflation, average rates could rise even higher, says Ted Rossman, credit card. analyst for, which tracks interest rates for consumer loans.

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

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The average amount owed by cardholders with a balance is $6,569, according to an analysis by LendingTree, an online loan marketplace. If you carry a balance of this amount, your interest rate is 18%, and you only pay a minimum of $165 per month, it will take five years to retire the debt, and your total payments will be higher to $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 excellent credit, one option is to apply for a balance transfer card with a 0% introductory rate. Wells Fargo, Bank of America and Citibank are offering balance transfer cards with a 0% interest rate 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 regular rate, which could be even higher than the rate you paid 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 are a homeowner, another option is to use a home equity line of credit to pay off your credit cards. The average interest rate for a home equity line of credit is 7.3%, according to, and you usually have up to 20 years to pay off the loan.

But before you borrow on 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 information on this topic and similar funds, visit


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