Home Consumer debt With soaring credit card rates, will logic or emotion help you reduce your debt?

With soaring credit card rates, will logic or emotion help you reduce your debt?


Halloween marks the start of the holiday season, and if the surrounding blocks in my neighborhood were any indication, people were planning on having a good time. Excellent!

I don’t want to spoil the party spirit. But two pieces of information suggest people should embrace frugality this holiday season. (Frugality doesn’t mean being cheap; it means being mindful of your spending.)

First, the average credit card interest rate is 18.91% and new card rates are higher than they’ve ever been, according to CreditCards.com. Rates are heading even higher since the Federal Reserve raised its benchmark interest rate last week.

Second, more people are concerned about debt. The 2022 survey on well-being at work by the Employee Benefits Research Institute and Greenwald Research reports that six in 10 employees say they are at least moderately concerned about the financial well-being of their household. Eight in 10 employees surveyed describe their level of debt as a problem, with the biggest concern being credit cards.

How can you eliminate credit card debt? Stop using your cards and create a budget. You can switch to a lower rate card if possible or consolidate your debt if the numbers make sense. Many people get out of debt by budgeting and spending wisely. Sometimes stronger action is needed.

There are two basic methods. The logic of finance dictates that it is best to pay off the debt at the highest rate first. This is your most expensive loan. (That’s the Spock method, for Star Trek fans.)

Make a list of your credit card debt, starting with the highest rate card and working your way down to the lowest rate card. Pay the minimum on all your cards except the one with the highest rate. This is where you target the additional savings. Eventually, the card is refunded. You move into debt at the highest remaining rate, paying the minimum on the others, until all loans are paid off. Etc.

The logic of math doesn’t always work. Many of us need a psychological and emotional boost when trying to stick to a debt repayment plan. (This is Dr. McCoy’s approach.)

We need a sense of accomplishment to continue. The trick here is to ignore the interest rate and attack your smaller bill first. Eliminate it as fast as possible and pay the minimum on everything else. Hit! Now move on to the next smaller debt.

Congratulations whichever method you choose.

Farrell is a business contributor to the Star Tribune, Minnesota Public Radio and the US Public Media Marketplace.