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Carrying a balance has always been costly, but now it’s especially expensive.

The average credit card interest rate in mid-December was 19.42%, the highest since 1992. As the Federal Reserve continues to raise short-term interest rates to reduce inflation, average interest rates could rise further, says Ted Rossman, credit card. Analyst at Bankrate.com, which tracks consumer loan rates.

It is not unusual for consumers who are struggling to pay their bills to pay the minimum payment on their credit cards. But paying the minimum over time will add thousands of dollars to the amount you owe.

According to analysis by online loan marketplace LendingTree, the average amount owed by cardholders who carry a balance is $6,569. If you carry that balance, your interest rate is 18%, and you only pay the minimum of $165 each month, it will take you five years to retire the debt, and your total payments will be $10,000. (You can crunch your own numbers using Experian’s credit card payment calculator.)

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Paying the minimum over time will add thousands of dollars to the amount you owe.


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If you have good to excellent credit, one option is to apply for a balance transfer card with a 0% introductory rate. Wells Fargo, Bank of America and Citibank offer balance transfer cards with 0% interest for up to 21 months, Rossman says. Most charge a transfer fee of 3% to 5% of the balance.

Once the introductory period is over, the interest rate will increase to the card’s regular rate, which may be even higher than the rate you were paying before the balance transfer. Ideally, you should try to pay off most or all of your balance before this happens. Divide the amount you owe by the number of months in the balance transfer period to get an idea of ​​how much you should try to pay off each month. Resist the temptation to add to your credit card debt, even if you get 0% interest offers on new purchases, Rossman says.

If you own a home, another option is to use a home equity line of credit to pay off your credit cards. The average rate on a home equity line of credit is 7.3%, according to Bankrate.com, and you typically have up to 20 years to pay off the loan.

But before you borrow against your home, make sure you can afford to make the payments if the economy goes south, says credit expert Gerry Detweiler. “If you fall behind on your payments, it puts your home at risk.”

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Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more information on this and similar money topics, visit Kiplinger.com.

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