With Consumer Debt Way Up, Here's How to Cut Your Credit Card Debt
By: Brian O'Connell

NEW YORK (sbup) — Uh-oh.

The Federal Reserve is out with an alarming report that consumer debt is at an all-time high, up to $81.5 trillion in the second quarter of 2014, which is a rise of $1.4 trillion on a quarter-to-quarter basis.

Overall household debt rose 3.6% for the quarter, the Federal Reserve reports.

To compare, consumer debt stood at $61 trillion in 2005, meaning overall debt has risen by $20 trillion in the past nine years.

Yes, the public sees the economy as improving, and is spending more money. And yes, the Great Recession put additional personal financial pressure on millions of households. Recently, banks and creditors have loosened lending and credit standards, giving consumers more access to money. "Despite the recent recession," the group says, "Americans are borrowing to finance new cars, college tuition and other consumer goods."

But consumers don't have to be overburdened by debt, especially credit card debt, which can really set consumers back financially. (The average U.S. cardholder owes $5,234, according to Creditcards.com.)

To cut consumer credit debt loads, CSCPA suggests:

Going the single-payment route. If you can manage it, consider a single payment for your credit card debt. "Certainly the best way to pay off your credit card debt is with a single payment," the association says. "If you can find the money to pay off all your credit card debt, you'll get back on solid financial ground quickly and without paying additional interest."

Aiming high. Paying off the credit card with the highest interest rate first is the next-best method to making a single payment. "You'll want to pay as much as you can to that account and then send the minimum payment due to each of the other accounts," the CSCPA advises.

Keeping it steady. Keep making those credit card payments, without fail. You don't need late fees.

Getting a HELOC. Should you consider a home equity loan to pay off credit card debt? Yes, if you can handle it responsibly, the CSCPA says. "If available, you can use a home equity loan to pay off credit card debt," the group says. "The interest on home equity loans is typically lower than credit card rates and is usually tax deductible." The group adds that HELOCs can be as easy to abuse as credit cards, particularly if you have a line of credit, so you need to be disciplined and use the money strictly to pay down your card debt. "Remember, your home equity loan, unlike credit cards, will be secured by a lien on your home," the CSCPA warns. "If you can't make your payments, you'll be in default, and the lender can foreclose on your home." 

Surfing to a lower rate. Another creative way to pay off your debt is to transfer your balances to lower-rate accounts, known as "credit card surfing." This method works "until you run out of lower-interest opportunities," the CSCPA says. "However, it does allow you to reduce interest fees and pay more against your existing balance."

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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