Hi y’all —
I've been binge-watching The Great British Bake Off recently. The latest season is great, I swoon every time Dylan comes on screen, and I'm learning important life lessons.
Every once in a while — usually during the technical challenge, when contestants are tasked with making an obscure dessert without a recipe — things go awry. A baker will forget to add sugar to their Battenburg batter or screw up the plaits in their bread wreath so badly that they just… start over. They "bin it," and they try again.
I always admire when someone does this. Not only does it take a lot of bravery, but it pays off: They're almost always able to course-correct and do better the second time around.
It makes me think of refinancing, which is the process of changing a credit agreement to make it more manageable. Especially with money, there's power in realizing you need a reset, and that's what I want to explore today.
How do I refinance credit card debt?
Rod Griffin, senior director of public education and advocacy for Experian, agreed to walk me through it. He says credit card refinancing generally refers to reducing my payments by getting a lower interest rate or better terms.
This is sorely needed, because the nation's debt situation is rough right now (to put it lightly). A report released earlier this month by the New York Federal Reserve found that credit card balances surged $24 billion last quarter. They're now about 8% higher than they were at this point in 2023.
And that's on top of a separate Fed report that pegs the average credit card interest rate at 23.37%. If I have a balance of $1,000, that means I'll rack up $19.39 in interest over a 30-day billing period. Yikes.
Luckily, Griffin says there are several common ways to go about refinancing my credit card debt. The first is to call my credit card provider and ask if it's possible to qualify for a lower rate.
"That's the most fundamental approach: talking to your lender and saying, 'I want to renegotiate my credit card terms,' and see[ing] if they can do that for you," Griffin adds.
To increase my chances of getting a yes, Credit Karma recommends I do a bit of homework. Before I get on the phone, I should look up the terms of my current credit card, check my credit score, find competing offers and review my record of on-time payments.
The hope here is that by getting a lower rate, I'll pay less in interest — and ultimately get out of debt quicker because more of my payments will go to the principal.
