High interest rates can make paying down credit card debt more stressful than other debts. With the national average credit card interest rate around 24.45% (as of September), this is especially true now. Many Americans are feeling the pinch in their bank accounts, so a debt management program (DMP) may be a good choice for you.
According to the Federal Reserve, in the second quarter of 2023, credit card debt levels reached an all-time high, rising $45 billion from Q1 and surpassing $1 trillion for the first time ever. It’s no surprise then that J.D. Power found 51% of Americans are unable to pay off their credit card balance each month.
How to Pay Off Credit Card Debt
- Create a budget: A budget is critical to helping you keep your finances in order and ensuring you’re allotting enough money to your credit card debt. When you make an appointment with a credit counselor, they’ll help you create or refine an existing budget, so it works for your specific financial situation.
- Decide how you want to pay off your loans: Multiple repayment methods can work, including:
- Debt avalanche: Pay extra money toward your card with the highest interest rate (while paying the minimum balance on your other cards). Once paid off, apply the additional funds to the next highest interest rate card.
- Debt snowball: This is where you pay down your card with the lowest amount on it, so once that’s paid off, you’re incentivized to pay down the next lowest card.
- Debt avalanche: Pay extra money toward your card with the highest interest rate (while paying the minimum balance on your other cards). Once paid off, apply the additional funds to the next highest interest rate card.
However, if you’re overwhelmed, a debt management program can help you get on track while giving you a definitive pay-off goal to look forward to.
How Can a Debt Management Program Help Me?
If you’re interested in a debt management program, make an appointment with a credit counselor at a credit counseling agency. Once you’re enrolled, your counselor will work with your creditors to consolidate your unsecured debt, work out an affordable monthly payment specific to your budget, and by enrolling in the debt management plan, creditors typically lower your interest rates.
A debt management program is designed so you can pay off your loans in three to five years, ultimately letting you endure these turbulent financial times. And knowing you have professionals supporting you will help keep you on track.