40% of millennials say credit card debt is their biggest financial setback, survey finds

Millennials are more financially confident and optimistic than any other generation, but are held back by high-interest credit card debt, a new survey has found. (iStock)

Credit card have many advantages, such as the possibility of consumers to earn rewards on their purchases and improve their credit ratings. But revolving credit card debt that’s carried over from month to month can be a costly burden due to high interest rates.

According to a new survey from Affirm, a buy now, pay later finance company, two in five (40%) millennials say credit card debt is their biggest financial setback. Millennials also worry about money an average of 7 times a day, more than any other generation surveyed.

However, the survey also revealed that millennials feel more financially confident than any other age group, and are the most optimistic about what their finances will look like ten years from now. Apart from that, 61% of US consumers also believe that living through the pandemic has made younger generations more financially savvy.

Keep reading to learn more about getting yourself out of credit card debt and visit Credible to explore your debt consolidation options.

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3 Strategies for Paying Off Credit Card Debt

It’s easy to rack up high-interest credit card debt without realizing it, especially if you rely on credit cards to cover unexpected expenses like car repairs and surprise medical bills. Recent data from the Federal Reserve shows that Americans are increasingly reliant on credit cards as revolving credit balances hit pre-pandemic levels in November 2021.

If you’re struggling to repay your debt, consider the following repayment strategies:

  1. Credit card balance transfer
  2. Debt consolidation loans
  3. Non-profit credit counseling

Learn more about each method in the sections below.

1. Credit Card Balance Transfer

A popular way to get out of credit card debt is to open a balance transfer credit card. This allows you to transfer the balance of one or more credit cards to a new card which you pay off on better terms, such as a lower interest rate.

Consolidating with a balance transfer card can help borrowers save money while paying off credit card debt. But keep in mind that some credit card issuers may charge a balance transfer fee worth 3-5% of the transferred amount. Also, there may be a limit to the amount you can transfer.

This method can be particularly advantageous for solvent candidates who can qualify for 0% APR on balance transfers. These zero rate offers usually last up to 18 months from account opening – and when the promotional period expires, interest is charged on the remaining balance.

Interest-free balance transfer offers give borrowers the option to pay off their credit card balance without paying interest. However, these offers are reserved for applicants with very good to excellent credit, defined by the FICO model as 740 and above.

You can compare balance transfer credit card offers on Credible for free without affecting your credit score and determine if this debt repayment method is right for your financial situation.

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2. Debt consolidation loans

Another popular debt repayment strategy is to use a personal loan for debt consolidation. Unsecured personal loans allow borrowers to pay off higher interest debt, including credit cards, at a low fixed rate. Since personal loan interest rates are at historic lows, according to the Fed, it may be possible to save more money than ever before using this method of debt consolidation.

Average two-year personal loan rate, Federal Reserve

By consolidating credit card debt into a personal loan, borrowers have the opportunity to save hundreds or even thousands of dollars over the course of paying off their debt. A recent analysis by Credible found that well-qualified borrowers can save nearly $2,400 on average by paying off credit card debt with a personal loan.

A debt consolidation loan can also help you lower your monthly payments. The same analysis found that borrowers can save an average of $66 on their monthly payments by paying off credit card debt with a personal loan.

Personal loan interest rates are based on the borrower’s credit profile, so applicants with high credit scores will qualify for the lowest rates. On the other hand, borrowers with bad credit may not qualify for a debt consolidation loan.

You can visit Credible to compare personal loan interest rates and terms from multiple lenders at once to help you find the lowest possible rate for your financial situation. Then you can use a personal loan calculator to estimate your monthly payment and potential interest savings.

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3. Non-profit credit counseling

The debt repayment strategies above can be good options for borrowers with good credit. However, consumers with fair or poor credit may not qualify for balance transfer credit cards or debt consolidation loans. It may be possible for subprime borrowers to pay off their credit card debt through nonprofit credit counseling.

Credit counseling agencies offer free or low-cost services to consumers struggling with insurmountable debt. A credit counselor can help you create a budget or enroll you in a debt management plan (DMP), which may have monthly fees.

As a bonus, credit counselors may be able to negotiate with creditors on your behalf to lower your interest rates and waive late fees. You can search for accredited nonprofit credit counseling agencies on the Department of Justice website.

If you’re still unsure which debt repayment strategy is best for you, contact a knowledgeable Credible loan officer who can walk you through your options. Additionally, you can browse the current personal loan interest rates in the table below.

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Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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