Some states are doing better than others when it comes to paying off credit card debt. See which states are doing best — and how to pay your debt off faster. This was originally published on The Penny Hoarder,...
Americans collectively started 2020 with more than 1 trillion dollars in credit card debt, $76 billion of it coming from 2019 alone, according to a recent study from WalletHub.
That’s A LOT of debt.
But despite that astronomical number, Americans are chipping away at their debt at a record rate. In the first half of the year alone, we paid down more than $118 billion dollars in credit card debt.
Go us!
This is the first time in 30 years our debts have dropped in the second quarter of the year, and this is the first time since the 2009 recession that we’re projected to end the year better than we started. Experts believe that has a lot to do with our changing consumer habits as a result of the pandemic.
But some states are doing better than others. Where does your state land? And how can you get out of credit card debt even faster?
The States Paying Down The Most Credit Card Debt
The recent WalletHub study, which examined data from TransUnion and the Federal Reserve, revealed Californians are showing us all up by paying down more than $7 billion in credit card debt so far this year. That’s 6% of the state’s total debt.
And although the people of Vermont only paid down $95.5 million of their debt, the lowest number in the country, that’s still more than 6% of their state’s total, too.
But when we break it down by household, we can really see which states are making the biggest impact on their finances:
Alaskans paid down the highest average debt per household with $663. Hawaii came in second with $647 in average credit card debt payments. Back on the mainland, Virginians paid off an average of $565, with Maryland not far behind them with $552.The other top states making debt payoff progress above $500 per household include California, Florida, Texas, Georgia, New York, New Jersey and Connecticut.
3 Simple Ways Make a Bigger Impact On Your Credit Card Debt
Now, this isn’t a competition (though, maybe we should make it one — a nationwide battle royale to knock out debt!). Any amount you can pay toward your credit card debt is important to your overall financial health. But, of course, the more you can chip away at it, the better.
Here are some tips to be more like Alaskans and lower your credit card debt the most:
1. Consolidate Your Credit Card Debt
One of the biggest roadblocks to paying down credit card debt is the interest that accrues the longer you hold onto it.
If your credit cards are holding a balance, you could be paying a 20% interest rate on each of them — and the credit card companies are getting richer the longer it takes you to pay them.
Consolidating your credit card debt into a single low-interest loan can make it easier to pay it all off sooner — and for less. A website called AmOne wants to help.
If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.
AmOne won’t make you stand in line or call your bank, either. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could help you pay off your debt years faster.
2. Make a Budget
Making a budget — and sticking to it — can free up money to pay down your debt. The 50/30/20 rule is one easy way to start managing your money without totally overhauling your life.
It’s pretty simple: 50% of your monthly take-home pay goes to your essentials (think: rent, groceries, minimum debt payments, etc.), 30% goes to your personal spending (like Netflix and getting your hair done), and the last 20% goes to your financial goals.
Making sure you account for that last 20% can help you pay off your debt faster than if you were to just pay the minimum every month.
3. Improve Your Credit
You might be wondering how your credit score has any effect on the bills that are already staring at you, but having better credit can open up a lot of helpful doors.
Good credit can get you lower interest rates when you refinance and better credit card offers (for zero-interest balance transfer offers!).
If you don’t know where to start, find out what your credit score is. Once you have that in hand, take a good look at your credit report and make note of any late payments or overutilized credit cards.
Once you spot the issues, you can start taking the steps to fix it.
Above all, Americans are doing an awesome job at lowering their credit card debts this year, and with the right tools, we can knock out even more of it.
Kari Faber is a staff writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.