Those who have spent their lives using credit cards — or perhaps more accurately, building up credit card debt — may feel nervous thinking about when they can close these cards and cut them up. For You: Suze Orman’s Top Tip for Building Wealth Is a ‘Very Easy One’ Up Next: 6 Things You Must Do When Your Savings Reach $50,000 In a video clip from “The Ramsey Show,” money expert Dave Ramsey offered encouragement to a listener who was struggling to get rid of their last credit card. Here’s why you can’t coun ...

Core Insights - The article discusses the financial dilemma faced by individuals with significant credit card debt, particularly focusing on the case of Alice, who owes $25,000 across her credit cards and is considering whether to prioritize paying off her debt or building an emergency fund [4][5]. Group 1: Credit Card Debt and Interest Rates - The average interest rate on credit card debt is significantly high, averaging 21.16% as of May, which far exceeds the return on investment from a high-yield savings account [2][5]. - Credit card debt in the U.S. reached an all-time high of $2.21 trillion in Q2 2025, with the average American owing $6,492 on credit cards [5]. Group 2: Financial Strategies for Debt Management - Alice's instinct is to pay off her credit cards first, which has advantages such as improving her credit utilization ratio and credit score, making it easier to secure loans in the future [1][5]. - There are two main strategies: focusing on paying off credit card debt first or building an emergency fund. Each has its pros and cons, with the former potentially leading to significant interest savings and the latter providing a safety net for unexpected expenses [8][11]. Group 3: Emergency Fund Considerations - If Alice opts to build an emergency fund first, she may save three to six months of living expenses, but this could result in losing money due to the high interest on her credit card debt compared to the lower interest earned on savings [8][9]. - A suggested approach is to save a mini emergency fund of $1,000 before focusing on debt repayment, allowing for minor emergencies without accruing more debt [12]. Group 4: Practical Steps for Debt Reduction - To expedite debt repayment, Alice should identify areas of overspending, create a strict budget, automate payments, and consider using windfalls to pay down debt [15]. - Two methods for debt repayment are highlighted: the Snowball Method, which pays off smaller debts first for motivation, and the Avalanche Method, which targets the highest interest debts first to save on overall interest [15].

Core Insights - The average credit card interest rate exceeds 22%, making it costly to carry a balance [1] - Balance transfer cards offer a 0% introductory APR for a limited time, typically between 12 to 24 months, allowing consumers to pay down debt without accruing high interest [1][3] Group 1: Financial Benefits of Balance Transfer Cards - The primary advantage of balance transfer cards is the 0% introductory APR, which allows payments to go directly toward reducing the principal rather than interest [3] - For instance, carrying $7,000 in credit card debt at 22% APR results in nearly $1,540 in annual interest, which can be saved or redirected to reduce the balance with a balance transfer card [3] - Longer introductory periods lead to greater savings on interest, with some cards offering terms of up to 24 months [4] Group 2: Debt Management and Organization - Balance transfer cards can consolidate multiple credit card debts into one, simplifying payment management and reducing the risk of missed payments [5][6] - This consolidation aids in tracking progress and maintaining motivation towards debt repayment [6] Group 3: Impact on Monthly Payments and Credit Score - Balance transfer cards can lower monthly payments due to the 0% APR, providing financial relief while encouraging continued payment at previous levels or higher [7] - Transferring balances can improve the credit utilization ratio, potentially enhancing the credit score by reducing the percentage of available credit being used [8]