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American household debt hits an all-time high — here are 5 easy steps to help you pay off your debt


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As Americans continue to feel the financial pressure of record-high inflation, household debt is on the rise. According to the Quarterly Report on Household Debt and Credit, released Tuesday by the Federal Reserve Bank of New York, U.S. household debt surpassed $16 trillion in the second quarter of 2022, reflecting a 2% jump from the previous quarter.

The report also revealed an uptick in delinquencies regarding debt from sub-prime and low-income borrowers, suggesting that harder times may be on the horizon for those who are already struggling.

Below, Select takes a closer look at the Federal Reserve Bank of New York’s latest report and lays out five easy strategies you can use to create a debt payment plan and help you get ahead financially.

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The rise of household debt in the U.S.

Consumer debt continues to grow by the minute, with the aforementioned report showing the total household debt in the U.S. is now at a whopping $16.15 trillion.

The Quarterly Report on Household Debt and Credit also revealed credit card balances had risen by $46 billion during the second quarter — although it acknowledged that seasonal patterns typically show a slight increase when compared to the first quarter each year — and by 13% since the past year, a record not seen in more than two decades.

The report also showed auto loan balances had increased by $33 billion, continuing an upward trend that began in 2011. While both categories have seen a slight uptick in delinquencies, the numbers remain historically low, suggesting that consumers are generally able to pay higher prices.

Meanwhile, student loan debt balances are essentially locked in at $1.59 trillion, lacking any significant change from the first quarter — the federal student loan moratorium remains in effect until Aug. 31, though there’s still a chance it may be extended beyond that point.

While the rising costs of everyday goods and services are largely out of our control, there are still a few things you can do to begin tackling any debt you owe at this time. I’ve actually been on my own debt pay off journey for the last seven years as I work to pay back nearly $80,000 in student loans, and I’m thrilled to say I’m almost done.

It can feel extremely overwhelming to process your debt situation, but speaking from personal experience, the most difficult step you’ll take is the first one. As you continue, there’s an increasing sense of momentum and the motivation to live debt-free, which helps keep you going.

Here are five easy steps to help you get started on your own debt payment journey today.

1. List out all your debts, including any interest rates

The first step to any debt-payoff strategy is to write it all down so you have a clear picture of exactly what, and how much, you owe. Make a list of every debt that you have, the amount of debt you owe for each thing, the interest rates and the terms, or structure of your loan.

Do this for any type of debt you want to pay off, whether it’s student loans, auto loans, a mortgage, personal loans or smaller debts such as regular monthly payments for your new iPhone. Once you have everything laid out, it’s easier to create a plan and move forward.

2. Decide which debt payoff strategy works best

While tackling debt is mainly a numbers game, the payback process can also tap into your psychology. Use one of these three common debt payoff strategies when it’s time to pay off that list of debts.

The debt snowball method

Similar to the way a snowball gathers more momentum as it rolls down a hill, the debt snowball method means you’ll be paying off your smallest debts first — regardless of the interest rate — and eventually larger and larger debts as you get into the swing of things. It can, however, lead to you paying more in interest over time.

The debt avalanche method

This particular strategy leans more toward math, rather than psychology. By using the debt avalanche method, you’ll be making the minimum payment on all your debts, while putting the most funds toward the one with the highest interest rate. In other words, if you have five different loans, you’ll keep paying the minimum amount on four of them, all while burying as much as you can into the one with the highest interest rate. This can help you pay less total interest over time.

Debt consolidation

This method is ideal for those who enjoy organization. If you owe multiple debts, you can simply consolidate them into one or two larger piles, which will give you a more focused target. Personally, I’ve used this strategy to open a personal line of credit and consolidate my student and car loans.

Many take out debt consolidation loans which will pay off your creditors directly and potentially offer you a lower interest rate than your other debts. Select ranked Upstart Personal Loans as one of the best personal loans for those who want to consolidate debt.

3.09% to 35.99%

Debt consolidation, credit card refinancing, wedding, moving or medical

$1,000 to $50,000

36 and 60 months

FICO or Vantage score of 600 (but will accept applicants whose credit history is so insufficient they don’t have a credit score)

0% to 8% of the target amount

The greater of 5% of monthly past due amount or $15

Terms apply.

You can also consolidate your debt by taking out a Home Equity Line of Credit, which essentially means you’ll be taking money out of your home to help pay off your debts, leaving you with a higher mortgage balance to pay off.

3. See what refinancing options are available

If you are working to pay off high-interest debt, you may be able to find lower interest options available through some of the products you already have. Here are a few options to consider.

For credit card debt

If you’re dealing with credit card debt, you’re likely already paying a significant amount in interest. For those who are actively paying off a balance on a month-to-month basis, it might make sense to apply for a 0% intro APR card and complete a balance transfer to help you save on those pesky interest charges.

Consider moving your balance over to a card with a 0% introductory APR offer. Select ranked the Wells Fargo Reflect(R) Card, Chase Freedom Flex? and the Capital One Quicksilver Cash Rewards Credit Card as some of the best credit cards to do so.

Learn More

On Chase’s secure site

5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% cash back on travel booked through the Chase Ultimate Rewards(R), 3% on drugstore purchases and on dining (including takeout and eligible delivery services), 1% cash back on all other purchases

$200 cash back after you spend $500 on purchases in your first three months from account opening

0% for the first 15 months from account opening on purchases and balance transfers

16.49% – 25.24% variable

Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either $5 or 5% of the amount of each transfer, whichever is greater.


Terms apply.

Learn More

On Wells Fargo’s secure site

0% intro APR for 18 months from account opening on purchases and qualifying balance transfers. Intro APR extension of up to 3 months with on-time minimum payments during the intro and extension periods. 15.24% – 27.24% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate

15.24% – 27.24% variable APR on purchases and balance transfers

Introductory fee of 3% ($5 minimum) for 120 days from account opening, then up to 5% ($5 minimum)


See rates and fees. Terms apply.

For student loan debt

Unless there is another extension, through Aug. 31, 2022 federal student loan debt is not accruing interest during the federal repayment pause. So at this point, it really doesn’t make sense to refinance your federal student loans.

That said, if you have private student loans, or if federal student loan repayment actually does restart in September, refinancing your student loans may be a great way to either lower your monthly payment or interest rate. In fact, I refinanced my own student loans six times and it ended up making a significant difference in the amount of interest I paid — I started out with a 7% interest rate and was able to refinance my loan down to 2.25%.

If your student loans have high interest rates, check to see if you qualify for a lower rate through one of Select’s recommendations for the best student loan refinance companies.

No origination fees to refinance

Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans

Variable and fixed

From 1.74% (rates include a 0.25% autopay discount)

From 3.49% (rates include a 0.25% autopay discount)

5, 7, 10, 15, 20 years

From $5,000; over $10,000 for medical/dental residency loans

Terms apply.

Learn More

On Laurel Road’s secure site

No origination fees to refinance

Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency/fellowship loans, plus special pricing and reduced rates for health-care professionals (physicians, dentists, optometrists and physician assistants)

Variable and fixed

From 1.89%; from 2.28% for resident rates (rates include a 0.25% autopay discount)

From 2.80%; from 3.08% for resident rates (rates include a 0.25% autopay discount)

5, 7, 10, 15, 20 years (but also offers any term below 20 years, subject to underwriting criteria)

For bachelor’s degrees and higher, minimum $5,000; for eligible associate degrees in the health-care field, up to $50,000 in loans for non-ParentPlus refinance loans

Terms apply.

No origination fees to refinance

Federal, private, graduate and undergraduate loans

Variable and fixed

Starting at 1.89% (rates include a 0.25% autopay discount)

Starting at 3.24% (rates include a 0.25% autopay discount)

Flexible terms anywhere between 5-20 years

A minimum of $5,000, up to $500,000 (residents of California must request to refinance $10,000 or more)

No income requirement

Terms apply.

4. Reduce your expenses as much as possible

It may be a sentiment as old as time, but it still rings true today: If you want to crush your debt, do your absolute best to cut back on expenses. This can be something as simple as eating meals at home or cutting back on how much you drive, especially with gas prices being as high as they are now. If you want to get really aggressive, consider selling your car, getting a roommate or two or even moving back home with family for the time being so you can save up.

While this isn’t the fun part of paying off your debt, creating and sticking to your budget is the key to paying it all off. Think of it this way: Even if you’re making $250,000 a year, if you spend it all, you’re left with nothing — it’s not about how much you make, it’s about how much of it you can keep.

5. Consider switching jobs or asking for a pay raise

The other side of the saving-as-much-as-you-can argument is that the amount of income you’re bringing in does matter — between a tight labor market and the rising cost of living, now might be a perfect time to consider switching jobs if it’s something you’ve been thinking about.

A recent Wall Street Journal article summarized the financial benefits of job hopping well: “The pay difference between those who stay and those who changed jobs is growing, according to the Federal Reserve Bank of Atlanta. Job stayers, or people who stayed in their job for the past three months, increased their wages by about 4.7% as of June 2022. Meanwhile, those who switched jobs received a raise of 6.4%. The gap is the largest in two decades.”

The tight labor market has made it easier for people to switch from their current roles to higher paying jobs at other companies. Plus, unless your employer has given you a roughly 9% raise to account for recent inflation, your income isn’t going to go as far as it used to. At the very least, consider asking for a pay raise to account for rising costs.

Bottom line

When you’re dealing with a large amount of debt, the idea of becoming debt-free can feel like a nearly impossible goal. But with the right plan, strategy and tools, it’s definitely an achievable feat.

In June 2018, I had more than $100,000 in debt between my student loans, car loan and other smaller debts. I never thought I would see the finish line but just over four years later, I’m down to paying off my last $12,500 of non-mortgage debt.

Throughout all this, the one thing I didn’t forget to do along the way was to continue investing in my future. Once you have all your non-mortgage debts under control (and under the 5% interest mark), it’s important to put some money away in an emergency fund, preferably in a high-yield savings account, and begin investing for the future within a taxable brokerage or with a Roth IRA. Paying off debt accomplishes one main goal — getting your net worth up — and as long as you’re doing things to increase that core number, the journey will all be worth it once you’re debt-free.

Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.

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Information about the Capital One Quicksilver has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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