Why You Should Pay Off Your Credit Cards as Soon as Possible in 2022

It really pays to chip away at your balance as soon as you can.

Any time you rack up a balance on your credit cards, it's a good idea to try to pay it off as quickly as possible. Doing so could limit the extent to which you accrue interest and financially struggle as a result.

But if you started 2022 with a credit card balance, or you racked one up since the calendar turned over, then it's really important for you to do what you can to chip away at that debt. If you wait, your debt might end up costing you more.

The problem with credit card interest

Credit cards are notorious for charging a lot of interest on balances you carry. But that's not the only problem with credit cards. Usually, the interest rate you pay on your credit card debt will be variable, which means it has the potential to rise over time.

Meanwhile, there's reason to expect an uptick in consumer interest rates across the board this year, and that extends to credit cards. After not raising interest rates for several years to allow the U.S. economy to recover from the financial blow of the pandemic, the Federal Reserve has made it clear that it intends to start raising interest rates this year.

This doesn't mean the Fed gets to dictate what interest rates your credit cards charge you. The Fed doesn't actually set consumer interest rates at all, so it has no say in the rate you lock in on a mortgage or the interest rate your savings account pays you for keeping your money there. Rather, the Fed decides what interest rates banks impose on one another for short-term borrowing.

But the Fed's decisions tend to influence consumer interest rates. And because the Fed is planning to raise rates, there's a good chance borrowing via a credit card balance will get even more expensive as 2022 chugs along. That's why it really pays to chip away at your existing debt quickly if you can.

How to pay off credit card debt efficiently

You have several options when it comes to paying off your credit card debt. You can pay off your cards in order of highest interest rate to lowest, or you can try consolidating your debts via a balance transfer. Many balance transfer offers come with a 0% introductory APR, so if your credit is strong, it pays to see if you qualify for one.

Of course, you'll also need to free up money to chip away at your debt. You may need to rework your budget and cut back on some expenses. Getting a side hustle on top of your main job also works for this purpose and may be easier than slashing your spending if you're already living pretty frugally.

While we don't know how much more expensive it will become to have a credit card balance this year, there's a good chance that carrying that type of debt will become more costly. If you're able to pay off your credit cards (or at least a portion of your debt) sooner rather than later, it makes sense to do so.