As the Federal Reserve raises interest rates to curb soaring inflation, taking on credit card debt is becoming increasingly wasteful for consumers.

The Federal Reserve recently raised interest rates by 75 basis points, making it more expensive to borrow money. Credit card issuers are now expected to raise their annual percentage rates (APR) – the amount of interest cardholders pay each month on their unpaid balances.

The average credit card interest rate is currently just under 17% and is only expected to climb. According to a report by CreditCards.com, the national average credit card APR could rise to well above 17 percent if most credit card companies fall in line with the Federal Reserve’s latest three-quarter-point rate hike. If the Fed continues to raise rates, as most analysts expect, those rates could spike even higher.

“Credit card debt is only going to get more expensive in the coming months,” said Matt Schultz, a credit card analyst at LendingTree, an online loan marketplace. “When the Federal Reserve raises interest rates, credit card rates go up for almost everyone, so it’s very important to reduce credit card debt now.”

Americans carry a lot of credit card debt. While credit card balances fell with the seasonal trend in the first quarter of 2022 to $841 billion, they were still $71 billion higher than a year earlier, according to the Federal Reserve Bank of New York. The average cardholder holds $6,569 worth of credit card debt, according to LendingTree.

Here are five ways you can reduce your credit card balance.

Avoid buying things you can’t afford
For starters, stop adding to your principal by buying things you can’t afford with credit cards.

Sometimes it’s tempting to use credit cards to bridge the gap between expenses and income, but that can add up when you have to pay it off and the interest rate is higher than other types of debt,” said Corey Stone, a senior advisor.” A former official at the Financial Health Network and the Consumer Financial Protection Bureau.

Payment experts suggest that if you can’t afford a vacation this summer, then skip it.

Because credit card interest rates are higher than those on mortgages, student loans and auto loans, it’s important to tackle outstanding credit card debt first.

“It may even be a good idea to forgo contributing to a savings plan, especially now when the returns aren’t great but interest rates are high,” Stone said.

Snowball v. Avalanche
Two popular methods of paying off past-due credit card balances include the so-called snowball method and the avalanche method. Using the snowball method means organizing all debts by amount, rather than by the interest rate you pay.

The idea is to make minimum payments on all debts to avoid being saddled with late fees, but first pay off the smallest, most manageable debts in full.

“You spend the money on that one because it immediately gives you a small victory,” says Nick Meyer, a certified financial planner who shares his personal finance knowledge on TikTok. “Then you move on to the next one until all your debt is paid off.”

When using the avalanche method, which Meyer says is more financially prudent, you rank your debts by interest rate, from highest to lowest – and then pay off the most expensive debt.

Of course, this method can be more mentally challenging, according to Meyer, because large balances of high-interest debt can take months to pay off.

Ask your card issuer for a lower rate
It’s always advisable to simply ask your credit issuer if they will lower your interest rate. Most people think there is no wiggle room for rates and fees, but this is not the case.

It is also possible to contact your lender with a repayment plan that you know you can meet.

Many lenders are willing to come up with payment plans for you that their customers don’t know about,” says Kristy Kim, co-founder and CEO of the new credit card company TomoCredit. Be proactive and ask for a specific payment plan.” For people without credit scores, such as young adults and immigrants

“If your lender doesn’t agree to a payment plan, or your APR is too high to get started, you can find products that can consolidate your debt into one place with a lower APR,” adds Kim.

Lending Tree’s Schultz says that while few people ask their lenders to lower their rates, most cardholders who do seek lower rates are successful.

Transfer your balance to a 0% APR card
Consumers can consolidate their credit card debt and transfer it to a new card that offers customers a 0% APR promotional rate.

“This may be a temporary solution, but long-term customers need to consider how to use a product that is inherently safer for them so they are psychologically trained to manage their personal finances at a lower risk,” says King.

For example, the Wells Fargo Reflect credit card offers new customers a 0% introductory APR for up to 21 months. This effectively allows people to continue paying off their debt while stopping it from growing.

Ted Rossman, senior credit card analyst at BankRate.com, says, “This can save hundreds or even thousands of dollars, depending on how much you owe.”

Divide the total amount you owe by the number of months in the no-interest period and stick to paying off a fixed amount each month. Note that you may have to pay 3 to 5 percent of your transfer fee up front, but Rothman says it’s “still well worth it.

“If you do it right and don’t put new purchases on the card, it’s a great way to save money. The new loan essentially pays off the old one at a much lower interest rate,” he added.

Take out a low-interest personal loan
A low-interest personal loan is another way to consolidate debt and pay it off at a lower cost. The interest rate won’t be zero, but it could be as low as 6 percent, compared to about 17 percent APR on most credit cards.

With a personal loan, you can combine different types of debt (including credit cards, medical bills and car payments) into one product and pay it off at a lower monthly interest rate. According to Rothman, loan terms are often favorable and can offer fixed low interest rates for up to five years.

Of course, reducing expenses and finding additional sources of income can help you bring in more money than you spend and allow you to pay off your debt faster.

Working part-time, selling unneeded items and cutting expenses can also help people gradually reduce their debt to manageable levels.

“The basic principle of earning more and spending less can be applied along with a number of other strategies,” Rothman says.