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Credit Cards

Credit card rates rose with terrifying speed in 2022 — here’s how to save big on interest charges in the new year

Credit card debt is expensive, but we have tools and strategies to help you pay it off.

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Vorda | E+ | Getty Images

Between out-of-control inflation and the Federal Reserve's attempts to temper it with rate hikes, just about everything in America became more expensive in 2022 — including credit card debt.

Credit card interest rates soared in 2022, and they did so with mind-boggling speed. According to Bankrate, credit card rates had the steepest single-year increase since the company began tracking them in 1985. Even worse for cardholders, the current average APR of 19.42% is also the highest on record.

This means that if you have any credit card debt, it's become more expensive than ever. Now's the time to prioritize bringing your card balances to $0. Select spoke to experts about how to manage high-cost credit card debt to pay less in APR charges — and ideally get rid of them altogether.

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Get a balance transfer credit card

A balance transfer allows you to move debt from a high-interest credit card to one with a promotional 0% APR period. Currently, some of the best balance transfer cards offer up to 21 months of no interest on balance transfers. 

For the longest introductory periods on balance transfers, look into cards like the BankAmericard® credit card, Wells Fargo Reflect® Card and the Citi Simplicity® Card.

Wells Fargo Reflect® Card

  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.

  • Regular APR

    18.24%, 24.74%, or 29.99% Variable APR on purchases and balance transfers

  • Balance transfer fee

    5%, min: $5

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

See rates and fees. Terms apply.

Citi Simplicity® Card

On Citi's Secure Site
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening.

  • Regular APR

    19.24% - 29.99% variable

  • Balance transfer fee

    There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, a balance transfer fee of 5% of each transfer ($5 minimum) applies.

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

  • Terms apply.

"Just decide how much you have to pay each month to pay off your debt by the time the intro period runs out," Beverly Harzog, credit expert and author of "The Debt Escape Plan," recommends. "It's a great way to pay off debt and save money on all the interest you'd have to pay otherwise."

It's essential not to add new purchases to your balance while you're working on paying off your debt. Not only will this add to your debt burden, but your credit card issuer may revoke your 0% interest grace period. That means they could immediately start charging you interest on those purchases. 

Additionally, keep in mind that a balance transfer isn't free: You'll most likely pay between 3% and 5% of the transfer amount in fees.

"You will need to ensure that your savings justify this upfront cost," says Kenneth Chavis IV, CFP and senior wealth manager at LourdMurray, a wealth management firm in Los Angeles.

You'll also want to check your credit score before applying for a balance transfer card. According to Harzog, you'll need a score of at least 720 for a good chance of getting approved.

Consider a debt consolidation loan

If you have multiple credit card balances and aren't likely to qualify for a balance transfer card, consider consolidating your debt with a personal loan. This will let you merge all the balances into one loan with a single monthly payment.

"With a debt consolidation loan, you're not gonna get a 0% offer, but you probably will get a much lower interest rate than what you're paying on your credit cards," Harzog explains.

Besides saving you money on interest payments, a debt consolidation loan can help remove the stress of juggling numerous credit card bills and due dates. Instead, you'll have a single fixed monthly payment, and your interest rate will be locked for the life of the loan.

Debt consolidation loan terms can range from six months to seven years. Your instinct may be to get a loan with the longest repayment period possible, but remember that the longer you take to repay the loan, the more interest payments you'll have to make. Some lenders also charge an origination fee but it's possible to find no-fee options. For example, LightStream Personal Loans have no sign-up fees. 

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    7.49% - 25.49%* APR with AutoPay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, and others

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 144 months* dependent on loan purpose

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.

You're likely to get better loan terms if you have good credit (or a credit score of at least 670). But some lenders will work with you even if your credit score is so-so. For instance, Upstart Personal Loans are a solid option for fair credit (generally considered a score between 580 and 669).

Upstart Personal Loans

  • Annual Percentage Rate (APR)

    6.4% - 35.99%

  • Loan purpose

    Debt consolidation, credit card refinancing, wedding, moving or medical

  • Loan amounts

    $1,000 to $50,000

  • Terms

    36 and 60 months

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so insufficient they don't have a credit score)

  • Origination fee

    0% to 12% of the target amount

  • Early payoff penalty

    None

  • Late fee

    The greater of 5% of monthly past due amount or $15

Terms apply.

Call your credit card issuer

Sometimes the best way to get what you want is to simply ask for it. In that spirit, you can call your credit card issuer and ask them to lower your card's interest rate

"Consider shopping for a new card that offers similar features with a lower APR, then call your credit card company or bank and ask if they will match the lower APR," Chavis suggests.

Besides the card issuer laughing at your request and saying "no," this strategy carries another risk. Your card issuer might take a good, hard look into how well you've managed your card. If you've been late on payments or tend to get close to your credit limit, this could raise a red flag to the issuer and backfire.

"I used to go to this internist… and he told me he made the mistake of calling his credit card issuer [to ask for a higher credit limit]," Harzog shares. "He had a sloppy payment history. They lowered his credit limit because they were alarmed by him asking for more credit when he couldn't even keep track of what he had already."

For that reason, it's best to only use this tactic if you've been an exemplary cardholder and know you can withstand the scrutiny.

Come up with a debt repayment strategy

Even if you don't get a balance transfer card or a debt consolidation loan, you can make good progress toward paying down your debt with a good strategy. Many people prioritize paying off the cards with the highest APR (while making all other minimum payments) to get rid of their most expensive interest payments quicker. Another popular approach is to pay off the smallest balances first, which can help you feel motivated to tackle the bigger debts.

When you're working on paying off credit card debt, make sure to stay on top of your budget. You want to track how much money you need each month to live your life and how much you can dedicate to getting rid of card balances.

Paying off debt is no easy feat. It takes discipline and patience, but it's the only way to safeguard your money from rising interest rates.

Bottom line

Credit card rates skyrocketed last year and might not get better in 2023. This makes your credit card debt even more expensive — and more important to eliminate.

Fortunately, you have ways to lower your current APR or even bring it to 0% for a limited period, which can help you with debt repayment. The key is to stick with whatever strategy you choose.

Finally, it may be a good idea to consider what caused your debt in the first place. If it was a large unexpected expense, you may want to add to your emergency fund. If your shopping habits led you down a road to debt, you should evaluate the spending patterns that led to a balance on your card. Preventing debt is always easier — and cheaper — than paying it off.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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