Opinion: Your credit card interest rate probably has gone through the roof. Here’s how to cope

Editor’s Note: Sallie Krawcheck is the founder and CEO of Ellevest. Victoria Sado is a certified financial planner professional at Ellevest. The views expressed in this commentary are their own. Read more opinion at CNN.

People don’t like to talk about debt. But now that the average credit card interest rate in America is a shocking, all-time record of 24.45%, we need to push past that money taboo.

That’s not to put it lightly. Credit card debt really hurts precisely because ‌interest rates are high. And since March of last year, as the Federal Reserve raised interest rates 11 times, credit card annual percentage rate (APR) has powered its way up. By comparison, in 2018, the average credit card interest rate was 14.22%. Pair that with data that shows those hikes overlapped with consumers’ increases in spending outpacing their increases in income … and ouch.

The gender debt gap means women especially feel this. And because of the gender pay gap, women are less likely than men to pay bills on time and in full.

Some news to ease the blow: The Fed held interest rates steady at the 5.25%-5.5% range after its latest meeting. Yes, it’s the highest rates have been in 22 years. But this pause gives borrowers an opportunity to pay down debt before another potential increase (which may be on the books before the end of the year).

Definitely take this opportunity. And not just because it might get costlier soon. Taking action on our money goals makes people feel in control of their futures — regardless of gender identity. And a taste of having financial power can go a long way.

Paying down (or paying off) a credit card can be a journey. But, dollar for dollar, it can also be one of the most powerful financial acts you can take.

Here are six ways to start paying down your credit card debt:

Give yourself a cushion before you start

We live in uncertain times, and for most people, having even a small safety net — in cash — can mean a world of difference when you’re busy tackling your high-interest debt. We recommend saving up an emergency fund of about one month’s take-home pay. Then you can turn toward your credit card balances. We don’t advise taking any money from your retirement investment accounts, since that would hit you with some serious tax penalties.

Don’t spend any more money on the cards

Unless you’re dealing with a financial emergency right now, stop using your cards until you can pay down your debt. Some people might tell you to cut them up, but we aren’t going to go that far — there’s always a chance that you’ll need them in an emergency later.

Make a payoff plan by organizing your money

At Ellevest, we like the 50/30/20 rule as a high-level, flexible way to organize your money. That means that 50% of your take-home pay goes to needs, 30% to fun, and 20% to “future you” (debt, saving, investing).

Minimum monthly payments go in that “50% to needs” bucket. Anything above and beyond the minimums goes in the “20% to future you” bucket.

Decide which balance to pay off first

There are two schools of thought here. First is the one we typically recommend: paying the minimum on all your debt, and putting any extra cash you can find in your budget on the credit card balance that has the highest interest rate. Knocking that debt out first can save you the most money on interest. After that one’s paid off, then focus on the balance with the second-highest interest rate, and so on. This is called the “debt avalanche” method.

You might also try the “debt snowball” method. This one involves focusing on the debt with the smallest balance first, and then moving to the second-smallest. It gives some people a sense of accomplishment to have fewer credit cards with balances on them.

Try to lower your interest rate

You might be able to get your credit card issuer to lower your interest rate, which could save you a lot over the long term. Before you call to explore this option, gather the facts: how long you’ve had an account, how many on-time payments you’ve made in a row, and how much you’ve paid in interest in the past year. You may also want to see if there are other credit cards offering lower rates.

Consider balance transfers

There are a lot of credit cards out there with balance transfer offers. That means if you move your credit card debt from your current provider over to them, they’ll give you a low interest rate for a while, as a promotion. Once the promotional period is over, the interest rate will likely jump up to the card’s normal rate.

Sometimes there’s also a one-time transfer fee, which they’d typically add to your total balance. (Note that your credit score could drop when you open a new card, as your credit needs to adjust to the changing of the average age of your credit. You may also get a hard inquiry on your credit report for applying for a new card. But these are temporary costs, and the long-term benefits usually outweigh them.)

You usually have to meet certain credit score and income requirements to qualify. If you think you’ll be able to pay off your balance before the promotional time limit is up, then transferring your balance could save you a lot of money.

Credit card debt is stressful, but it doesn’t have to rule your life forever. Every penny you pay off is a win. Stick to your smart money moves and take comfort in the fact that you’re doing everything in your power to take control of your financial future.