Know your options for credit debt

The average balance of credit card debt in the U.S. is $5,525 in 2021 according to Experian. No matter the balance, having to make credit card payments at high interest is never fun.

If you’re looking to reduce your credit card debt, I have outlined a few methods below. Keep in mind that these examples pertain to cardholders who have not fully paid off their balance each month.

With the “debt avalanche” method, you are targeting the credit card debt with the highest interest rate first. For example, let’s say that you have two credit cards on which you are making minimum payments. Card A is charging 18 percent on

your $5,000 balance while the second card is charging 12 percent on your $2,000 balance. In this example, we assume you have an extra $1,000 per month to pay down debt. With this approach, you will simply bear down on paying higherinterest card A while making the minimum payment on the lower-interest card B. You need to be disciplined but this method can result in paying less interest over time provided you can stick to the plan.

Another method that you hear about is the “debt snowball” approach. With this approach, you take on the smallest debt first without consideration for interest rates. In the example above, you would pay the minimum on card A while attacking the smaller debt balance of card B. Psychologically it can be an easier hurdle to cross since paying down the $2,000 may not seem as insurmountable as paying down the larger $5,000 credit card debt balance. That said, you will pay more in interest with this method so it’s not my personal favorite.

Keep in mind that with either of these methods, you should refrain from using credit cards during this period. The goal is to reduce debt, not to grow it. Both of these methods take discipline and commitment but paying down debt can be very rewarding.

As an aside, if you bought something with a short-term special zero-interest card offer, these methods may not make sense as the goal here is to reduce debt and not to create more if you don’t pay off the balance during the allotted zeropercent interest period.

When it comes to tackling credit card debt, we would recommend speaking with your accountant or financial planner about which credit card debt to tackle first after they review your overall debt situation and other options beside these. In some cases, if your balances have grown to unsustainable levels, they may recommend that you do your homework to seek out a reputable consumer credit counseling company.

Eric Tashlein is a Certified Financial Planner professional, founder and financial advisor at Connecticut Capital Management Group, LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Investment Advisor Representative, Connecticut Capital Management Group, LLC, a Registered Investment Advisor. Connecticut Capital Management Group, LLC and Connecticut Benefits Group, LLC are not affiliated.