Best ways to dig out of debt with credit card rates near 21%
NEW YORK (WABC) -- Credit card debt is sky high and cardholders have never paid more to borrow.
The average annual interest rate to borrow is now near 2%. According to NerdWallet, that's the highest rate since the Fed started tracking it nearly 30 years ago.
But help is on the way. 7 On Your Side's Nina Pineda has the best ways to deal with and eventually dig out of from under a mountain of credit card debt.
Riding the plastic wave has come crashing down on consumers and debt relief attorney Leslie Tayne said people are drowning in debt.
At Tayne's Long Island office, counselors are busier than ever helping families find solutions.
"It is really bad this year, more so than ever," Tayne said. "Day-to-day purchases with interest rates being as high as they are, the credit card debt is exorbitant."
Her advice to clients is first face your debt. She says to take out all your cards, write down balances and interest rates.
Choose to either pay down the balance on the card with the highest rate or pay the one with the highest balance.
And never pay only the minimum.
"Understand that every month you carry a balance and the balance will go up if you only make the minimum payment, they are designed to be less than the interest that you're paying on it, so that's why it perpetuates for 20-25 years," Tayne said.
Other solutions to consider are a personal consolidation loan or balance transfer to 0% interest cards. You will need great credit to qualify though, usually above a 740 score.
Another option is Debt Resolution Program, a process which closes a credit card.
Interest rates and your balance owed are renegotiated, but proceed with caution.
"There's so many scams out there, companies that pop up, tons of solicitations and consumers really don't know who to trust," Tayne said. "There are so many aspects of the debt relief process, including how it impacts your credit, there are tax implications, and legal ramifications, you can be sued, there can be surprises you may not know if the creditor is telling you accurate information."
If you've been a long-time credit card holder with on-time payment history, ask for a lower interest rate.
"You can also negotiate with the credit card company, if you've been with them for a while, call them up, ask for a rate reduction, you'd be surprised how many times they have other products they can put you in, different types of credit cards that can reduce the interest rate," Tayne said.
Even if you get turned down for that lower interest rate, call your lender and work out what you can afford to pay over time and then put that amount on autopay.
Then either cut up your credit card or ask your company to lock your account so you're not tempted to make purchases and add to the balance.
You never know what you can negotiate, but you won't find out if you don't ask.
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