Suze Orman: This Is the ‘Worst Thing You Can Do’ When You Have Credit Card Debt
Written by
Gabrielle Olya
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Amber Barkley
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If you have credit card debt, you’re in the majority. According to a 2023 survey by Clever, 61% of Americans are in credit card debt, with the average balance at $5,875.
While having high-interest debt like credit card debt is not ideal, Suze Orman said that it’s important to deal with it head-on.
“If your financial reality right now includes credit card debt, I want you to hold your head high, and then resolve to take steps to best manage to pay down that debt,” she wrote in a recent blog post. “The worst thing you can do when you land in a sticky financial situation is to just give up or resign yourself to a mess you tell yourself is insurmountable. When you feel powerless, you are powerless.”
To take control of your credit card debt, Orman recommends taking the following steps.
Ask Your Credit Card Company for a Lower Interest Rate
As of March 5, the average credit card interest rate is a whopping 27.94%, according to Forbes Advisor. The higher your interest rate, the longer it will take to pay off your debt, so calling your credit card issuer to ask for a lower rate can be greatly beneficial.
“Getting [your interest rate] reduced by even a few percentage points is going to help,” Orman wrote in her blog post. “And you would be surprised how often this works. Besides, it costs you nothing but a few minutes on hold to make the request.”
Review Your Spending To Find Costs You Can Cut
Orman recommends reviewing what you spent your money on last year to find ways to reduce spending.
“Many card issuers compile a year-end summary that categorizes your spending,” she wrote. “I hope you will take an honest look at whether there were ‘wants’ you charged. Now consider that you are paying 20% or more interest for wants you bought. I think when you go through this exercise, it can help you avoid making other unnecessary purchases that will cost you a ton in interest.”
Consider a Balance Transfer Credit Card
If you qualify for a balance transfer credit card, this can be a good option for you.
“The best transfer cards right now allow you to move a balance over from a high-rate card and not owe any interest on that balance for 12 to 18 months,” Orman wrote. “That gives you a year or more to work on paying off (or paying down) the debt without being hit with interest charges.”
However, this isn’t a “get out of jail free” card, so make sure you utilize this option wisely.
“There is typically a fee for a balance transfer — it can be 3% or so of the total amount — so this is only a good option if you are ready and able to make a big effort to pay down the debt,” Orman said. “A fee of 3% is well worth it if you can wipe out a balance that is charging you 20% or higher interest.
“If you expect you will make a big dent in your balance but not get it entirely paid off, you have an extra step: check what the fine print says your interest rate could be after the 0% deal expires,” she continued. “It will typically be a range, based on your credit score. Ideally, you want today’s top range to be no worse than what you’re currently paying on your balance.”
Increase the Amount You Pay Each Month
Orman said that you should increase the amount you pay toward your balance every month — no matter how high your balance may be.
“I don’t care if you have a $10,000 balance. My challenge is for you to pay more next month than you did this month,” she wrote. “Then do it again the following month. And again.”
Knowing you are making progress every month can help keep you motivated to stay the course.
“If you can start making this a habit, you will notice you are motivated to find ways to increase your payments even more,” Orman wrote. “Don’t look at the balance. Focus on the fact you are limiting your new purchases to absolute needs (no wants!) and you are paying more each month than in the past. That’s making important progress.”
Consider Getting a Side Gig
The more money you make, the more money you can dedicate to paying down your credit card debt.
“If there’s the smallest possibility you could add some gig work for five to 10 hours a week, what might that generate in extra cash that you could use to pay down your credit card debt?” Orman wrote. “The key is to promise yourself that every after-tax dollar from this side gig will go toward getting out of a credit card debt.”
She noted that “this can be an especially powerful money move if you pair it with a balance transfer deal: using income from a temporary side gig to pay down a balance when there is 0% interest being charged is going to help you make a serious dent in what you owe in a short time.”
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