A number of credit card companies are willing to let customers skip payments during these difficult times. Even so, putting your debt on the back burner might not be a wise choice, warns investing guru Warren Buffett.

“People should avoid using credit cards as a piggy bank to be raided,” Buffett said at the annual shareholders meeting for his company, Berkshire Hathaway, in early May. “You can’t go through life borrowing money at those rates and be better off.”

While some might roll their eyes at the thought of taking credit card advice from a billionaire, the Oracle of Omaha is spot on. The average interest rate for a credit card is around 16%, and some cards carry rates higher than 22%.

So unless your credit card company is pausing interest, not just payments, all you’re doing is making it harder to claw your way out of debt in the long run.

However, there is a way to clear your credit card balance faster, even during the pandemic: by consolidating your debt with a personal loan.

Pay less interest and become debt-free sooner

Excited African American woman in glasses read good news online
fizkes / Shutterstock

With a debt consolidation loan, you can trade in all of your existing credit card debt for one monthly payment at a lower interest rate.

Free services online can let you compare terms from multiple lenders with just a few clicks, making it easy to shop around and find the best rate.

Depending on how much interest you’re currently paying, consolidating your debt could lower your monthly payment and save you thousands of dollars over the course of your loan.

Let’s say for a moment you owe $10,000 on a credit card with a 16% interest rate. If you refinanced with a 48-month debt consolidation loan at 7%, you could save $3,402 in interest over the course of your loan — and become debt-free more than eight years sooner.

Earn perks without racking up interest

contactless payment card pdq background copy space with hand holding credit card ready to pay at cafe for coffee stock, photo, photograph, picture, image
Lorna Roberts / Shutterstock

Once you’ve fully paid off your credit card debt, one way to avoid digging a new hole is to switch your spending from credit to cash or debit.

Debit cards command the same convenience as credit cards — tap-to-pay transactions and online shopping — with the added benefit of only spending what you have in your account.

If you’re worried about losing out on credit card perks, some companies now offer debit cards that provide cash back rewards, too.

Credit card debt can be a vicious cycle, and deferring your payments during the pandemic is just going to drag it out. If you’ve got decent credit, consider applying for a personal debt consolidation loan and curbing your spending. You could save thousands and become debt free years sooner.

About the Author

Shane Murphy

Shane Murphy

Reporter

Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

You May Also Like

Looking For Passive Income? There's One Option Right Below Your Feet

One company’s innovative approach makes farmland investing easier and more accessible.

3 Ways to Reduce Student Loan Debt Before Biden's Payments Freeze Ends

Here's how to reduce your debt before loan repayment and interest resume in the new year.

3 Ways to Earn Big Returns Without the Shaky Stock Market

Don't limit yourself to the stock market. These alternatives can trounce the S&P 500.

Do Big Stores Save You the Most? We Price-Check Our Shopping List

With one 30-second trick, we found $460 in savings beyond Walmart and Amazon.