So you spent too much

The majority of Americans are living paycheck to paycheck, according to a recent survey from PYMNTS Intelligence, and many turned to credit cards to meet day-to-day spending needs while inflation remains high. At the end of 2023, the average credit card debt was 10% higher than the year before, an average of $6,360 per borrower—an all-time high.

If you’ve made a commitment to get rid of your credit card debt, Josh Denton, manager of product strategy at BOK Financial® says it’s important to just get started. “Prioritize paying off credit cards as soon as possible, starting with those with the highest annual percentage rate (APR),” Denton said. “To really attack your debt, you’ll also have to manage the behaviors that got you into trouble in the first place.”

Denton's tips for creating debt-reducing habits include:

Adjust your budget. Hopefully, you're only using credit cards to get through a temporary stretch. But if there are some fundamental changes to your situation, and accruing debt will be ongoing, you need to lower your expenses.
Hide your credit card. You can go as far as cutting up the cards so you can't use them.
Use cash only. Withdraw a predetermined amount of cash to constrain your spending.
Unlink credit cards from online accounts. Sometimes, the simple act of getting up to grab your wallet can be enough to keep you from making an impulse purchase.
Automate your payments. This will ensure you don't accidentally accrue additional late fees and additional interest on balances carried over.
Consider bringing in additional income. This can include selling household items, asking for a raise or picking up a side hustle. If you anticipate getting a tax refund or a bonus this spring, consider applying those funds to reduce your debt.

When credit card debt is too big and rates are too high

"I recommend consumers try to avoid carrying a credit card balance," said Denton. "Even though that's best practice, I know spending can get out of control, and it's not always possible to pay everything off immediately, which can be a problem if the APR is high."

Debt consolidation is another solution if you've overspent recently. Denton offers two options, both with their own pros and cons to consider:

Transfer the balance to a 0% APR card
Pros	Cons
Lower APR: Credit card interest rates have soared recently, up to 33% in some cases. If your debt is currently on a credit card that has a high interest rate, it makes financial sense to transfer.	Transfer fees: Most cards charge a 3-4% fee to transfer, which can add to your total debt. Credit score ding for multiple transfers: Repeatedly opening new credit cards and transferring balances could damage your credit scores in the long run. Future rate hike: Denton cautions consumers that rates often climb after the initial 12-month 0% rate. "Be sure to plan to pay off the balance before the interest rate kicks in," he said.

Consolidate debt with a home equity loan
Pros	Cons
Lower interest rate: "Currently, home equity loan rates are around 8%," said Denton. "This is much lower than the 25% or 30% APR you might be paying on credit cards. Taking out a home equity loan could pay off the credit card debt, and you'll accrue less debt from interest over time." Extended pay schedule: Home Equity loans generally have terms of up to 25 years available, according to Denton. "The debt is spread out and has a much longer amortization period for home equity loans than for credit card debt."	Only an option for homeowners: If you don't own your home or if you don't have enough equity available, Denton suggests a personal loan to consolidate debt. While typically higher than a home equity loan, personal loan APRs are still much lower than most credit card interest rates. Risk of losing your house if you don't repay the loan: Home equity loans have higher stakes if you don't repay them—including potentially losing your house. While they're an excellent tool for consolidating debt, Denton suggests only taking out a home equity loan if you're certain you can manage the payments.

With a proactive approach and some spending changes, it’s possible to get out from under debt. Denton suggests staying debt-free by saving for big-ticket items like vacations or the holidays throughout the year so you can increase your spending without carrying a credit card balance.

So, you spent too much

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