Effective Strategies for Reducing Credit Card Debt and Balances
The latest figures from the Federal Reserve show a substantial increase in credit card debt. In this blog post, I’ll discuss what steps you need to take so you can start to reduce your credit card balance and get a lower interest rate so you can begin your debt-free journey.
Key Points:
- Credit card debt soars, reaching a record high.
- Half of the households have credit card debt, and the average balance is over $6,000.
- How to start saving money and reducing debt.
The Federal Reserve Bank of New York recently released credit card debt figures. In the second quarter, credit card debt increased by $27 billion. The credit card debt is $1.14 trillion, a record high.
Fifty percent of households have a monthly credit card balance. The average credit card balance is $6,329.
What You Can Do to Control Credit Card Balances
Controlling your debt directly ties into your savings. The more debt you have and the more you pay towards interest, the less money there is to save, especially for retirement. But consistency is the key. I even posted about consistency earlier today on social media. While it may be cliché, “Rome wasn’t built in a day.”
As a bankruptcy lawyer for over two decades and now a law professor, I realize the difficulty involved. From a practical standpoint, there is a different perspective on now versus tomorrow. Think about it. Nothing is thrilling or exciting about saving a few dollars every month for decades. It’s pretty boring, actually. But there sure is something exciting about my new laptop that I received yesterday. My laptop is now. Retirement… that’s far away. “I can’t think that far ahead.”
My mom once told me that when I turned 15 years old, time flies. I’m fifty-two now. She was right. Where did the time go? I surely wasn’t thinking of retirement as a teenager, yet here I am.
I’ve hit my share of financial bumps in the road. At times, I think a financial brick wall was built in my path. But that’s okay. We all face challenges in one form or another. But we can and do overcome those challenges. It takes time. If you are near my age, I’m sure you remember the story of the tortoise and the hare.
So, regardless of your budget, start saving today. Make it a habit. You don’t have to come up with $500 or even $100. It doesn’t even matter if it’s $5 or less. The point is to start. Challenge yourself. Change your mindset. Make it a habit.
Saving money and being debt-free is the same as trying to stay fit and healthy. Do you want to lose twenty pounds? It’s not going to happen in one day. It takes time. But the only way to lose weight is by taking that first step. Finances are no different. So do whatever you have to do. Just make sure to do it.
What Steps You Can Take Now to Save Money
I have said endless times in my YouTube videos that money saved is money earned. If I save $10 today, that’s $10 less I have to earn working. In my mind, that’s free money. So, start working on a savings plan. Any amount you save is more than zero!
You can take multiple steps as well to reduce your debt. The “snowball method” or “debt avalanche method” is a common strategy, and there is definitely logic in that approach. I believe it ties in perfectly with taking that initial step.
With the snowball method, you start paying off your credit cards with the least debt. Just like a snowball, it starts small and gets bigger with time. With each credit card balance you pay off, slowly but surely, your savings get bigger with time.
When possible, pay more than the minimum payment. You can find plenty of online calculators to figure out how fast you can pay off your balance with minimal payments versus adding a few dollars every month. You’ll be surprised by the difference.
Debt Consolidation Can Save You Thousands of Dollars
Consolidating debt is a simple technique to save money. If you qualify for a personal loan, the interest rates are much lower, and a structured payment plan helps organize your monthly budget. There’s also the added convenience factor of only making one monthly payment versus several.
Consider a credit card balance transfer if you can’t qualify for a personal loan. Credit card companies often offer a lower introductory annual percentage rate (APR), if not a zero rate, with credit card balance transfers. The introductory rate of six to twelve months could result in you saving hundreds, if not thousands, of dollars in interest. Also, try negotiating interest rates by contacting your credit card company. A lower interest rate could result in substantial savings.
Remember, consistency is key. See you soon on the path to financial freedom.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link. Archives on credit card-related topics can be found via this link.
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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
Updated April 14, 2025.
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