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Credit card debt is on the rise, and with rates at their all-time high, that’s no surprise.
For many consumers, Black Friday – and the entire upcoming holiday season – will only exacerbate the problem, leading to even more stressful credit card debt. Fortunately, there are things you can do to prepare and, ideally, reduce your debt before heading into the holiday season.
Want to make sure you’re prepared as Black Friday approaches? We asked a number of experts for their suggestions.
Start exploring your top debt relief options online now.
How to Lower Your Credit Card Debt This Black Friday
Here are four effective ways credit card users can start reducing their credit card debt now:
Consolidate your debts
A great option is to consolidate your debts. If you have multiple credit cards (or other debts you’re paying back), you can use one loan or credit card to pay them all off, essentially merging them all into one. Depending on the product you use, this often means a lower rate and a lower total amount per month than before, allowing you to pay off debts faster.
“Consolidation is a great idea if they can move to a lower or no rate card without a balance transfer fee,” says Mike Chadwick, president of Fiscal Wisdom Wealth Management. “The best time to do this is around the holidays because the temptation is greatest.”
Be careful if you choose to use a different credit card consolidationas that could easily increase your debt if you use the additional credit card for post-consolidation expenses. If you choose to use a new card to consolidate, be sure to compare offers from different card issuers as rates and balance transfer fees can vary.
“The options are endless,” says Chadwick. “It’s all about shopping.”
View your debt consolidation options here.
Negotiate your interest rate
You can also try to negotiate the rate on your existing credit cards. As Jason Fannon, senior partner at Cornerstone Financial Services, puts it, “Call the issuer and ask them for a lower interest rate.”
It won’t always work, but it’s worth a try. Don’t forget to explain reasons why you should get a lower rate. Are you facing financial problems? Do you qualify for lower offers elsewhere?
“This is a negotiation,” Fannon says. “It allows the borrower to plead his or her case; he or she may have an excellent payment history, have a competitive offer from another issuer, or experience temporary unemployment, etc.”
Try debt forgiveness
Debt forgiveness is a kind debt relief you can explore with credit cards. This means your credit card company agrees to forgive all or part of your remaining balance, meaning you don’t have to pay it back.
“Creditors typically only negotiate if you’re behind on payments,” says Nate Towers, director of Five Pathways Financial.
Note: When a debt is forgiven, it is considered taxable income, so it can increase your annual tax burden.
Focus on a payout method
You can also focus heavily on aggressively paying down your debts. Two popular methods are the snowball method and the avalanche method. With the snowball method, you focus on paying off your debts with the lowest balance first, and make only minimum payments otherwise. Once that’s paid off, focus on the next lowest debt, and so on.
With the avalanche approach, you prioritize making the largest payment on the card with the highest interest rate, Fannon says. “This process minimizes the amount the borrower pays in interest by addressing the debts with the highest interest first.”
Get help
If you’re unsure how to best tackle your debt as the holidays approach, contact a financial advisor, credit counselor or debt counselor. They can help you determine the best path forward and answer your questions.
