Solutions for Paying a High Interest Credit Card

If your credit card has a high interest rate, pay it off quickly.credit card image by jimcox40 from Fotolia.com

Large debts on a high-interest credit card can quickly become unmanageable. For example, on a card with 24 percent annual APR and a balance of just $5,000, you spend $100 every month just on interest. Take steps to pay off your high-interest credit card as soon as possible to avoid spending so much on interest.

Balance Transfer

Most credit cards allow balance transfers, where you use the credit card to pay off the balance on another of your credit cards. You will typically have to pay a fee of about 3 percent to 5 percent of the balance being transferred, so this is only advantageous if the card to which the balance is being transferred has a significantly lower interest rate. The best balance transfer solution is to get a new credit card with a low introductory APR. Transfer the high-interest balance to this card and pay it off aggressively to finish before the introductory period ends.

Some credit card companies may be willing to negotiate a lower interest rate for people who have been good customers for at least one year. Call the customer service number on the back of your high-interest credit card and ask the representative if you can have a lower interest rate. Point out your good payment history and mention that you may transfer the balance to another card if your rate is not lowered.

If your savings are earning less annual interest than your credit card charges, you can save money by using the savings to pay off your credit card. After paying off the credit card, stop using it and make monthly payments of the amount that you would have spent on credit card bills into your savings account instead.

Loans such as home equity loans and personal loans typically have much better interest rates than high-interest credit cards. Pay off your credit card bill with the loan and then pay off the loan as fast as you can. In the meantime, stop using the credit card unless you can afford to pay it off in full every month to avoid interest charges.