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What If Your Credit Card Interest Rate is 25%?


This is an email we got recently from a reader.

Hello Everyone. I currently have about $4400 in credit card debt. It may not seem much, but all the rates on those are at about 25 plus percent. Im dying here. I usually pay just a little more than the minimum due but am getting nowhere. With my budget I set aside only 200 dollars a month towards these credit cards. How do I get out of this? Please help.

Al S

Answer – The obvious answer is to get a new credit card and transfer your balance to a card that preferably has a balance transfer deal. But having said that, you really have not revealed your whole situation like

  • Are you maxed out on all your credit card debt?
  • What is your income?
  • What is your credit score
  • Have you had your credit lines pulled recently?
  • This is what I would do:

    1. Get a new credit card to do a balance transfer – If your credit is good, you should be able to get a 0% balance transfer deal. If your credit is not good, you may not be able to get a 0% deal. In that case, just get another card and then transfer the balance because anything is better than paying 25% interest rate

    2. Look at your budget again – Look, your credit card debt is only $4,000. So while it may feel like the end of the world to you, it is not the end of the world. There are many people who have got rid of much more credit card debt in a relatively short time. Revisit your budget again. Set aside more money to pay your credit card debt. You should be paying more than the minimum payments

    3. Set your debt reduction plan – Once you figure out how much you are spending a month, figure out where you can cut back on your expenses. Settle on an amount (more than $200 in your case) to pay your credit card bills. Figure out how long it takes to pay off your debt.

    4. Do not incur any new credit card debt – I’ll say it again – while you are paying off your credit card debt, do not incur any new ones. If you charge things to your card, pay them off every month.

    Before You Get a New Card – Before you get a new card, get a free copy of your credit reports from each of the credit bureaus – TransUnion, Equifax and Experian. You are entitled to a free report every year. Go to their website and get it directly from them. Check for any errors on your report. If there is, dispute it (since the entity that has reported the inaccurate information has 30 days to verify it). If you do have errors, it might explain if you have had your credit scores dinged, which may explain why your rates are at 25%.

    Consider Increasing Your Income – Another thing to consider is to try to increase your income. You could perhaps get a second part-time job for extra income. Or rent (sublet) out your room to someone for a monthly fee. These little extra income do make a difference.


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