Owe Money on Your Credit Cards? Suze Orman Says You Should Do This

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Owing money on your credit card can be beyond frustrating, financially speaking. All the more so if you carry a high balance and pay a high interest rate. It may be reassuring to know that you're not alone. According to research from The Motley Fool Ascent, about 45% of Americans have credit card debt.

Indeed, given so many Americans struggle with credit card debt, it isn't surprising that most financial gurus, including Suze Orman, have tips on how to deal with it.

We'll dive into Orman's practical steps below. But Orman's most useful advice isn't about the "how," it's about your state of mind. She tells her followers not to give in to feelings of powerlessness. Orman says you need to believe you can pay down your credit card debt and you don't have to be stuck with that balance forever.

Here are four moves Orman recommends you make today.

1. Look for ways to lower your interest rate

Credit cards charge high interest rates, which is one of the reasons managing them can be tricky. The average APR on a credit card right now is almost 23%, according to Fed data. If you carry a balance of $5,000, that rate translates to almost $100 in interest each month.

In that scenario, you'll need to pay that $100 in interest plus an amount toward your balance if you want to pay down your debt. That's a pretty strong current to swim against.

Orman suggests two ways you might lower your rate.

Call your card issuer and ask for a lower rate

Some card companies will lower your APR by a couple of percent if you ask them. It helps if you make payments on time and have had the card for a while. Even a small APR reduction will free up cash for repayments.

Look for a balance transfer card

The best balance transfer credit cards offer a 0% intro APR for a set amount of time, often 12 to 18 months. That gives you a window where you can focus all your efforts on reducing your balance without losing any money to interest payments.

That said, balance transfer cards are not a magic bullet. For starters, you may need a decent credit score to qualify. You'll also need to pay a balance transfer fee that's usually 3% to 5% of your total balance, so be sure to weigh the costs involved.

Most importantly, you need to stop using your old card so you don't wind up with a higher balance than before. If you go this route, make sure you are confident you're ready to tackle your debt.

2. Review your spending

Suze Orman could be described as the queen of needs vs. wants. It is a theme that features heavily in a lot of her advice. A need is something that is essential to your well-being. That might be a roof over your head or food from the grocery store. A want is something you can live without, such as a takeout meal or vacation.

Orman suggests looking through the year-end summary that many card issuers send out. Think about whether you charged any "wants" to your card. Then think about how much interest you've been paying for things you didn't need. This isn't about generating shame. It's about using that understanding to help you avoid using your card to pay for future "wants."

3. Increase your credit card payment a little each month

Orman has a challenge for you: She suggests trying to put $50 extra toward your monthly payment. More than that, she wants you to pay a little more the following month and the month after that -- so you keep upping the amount.

She also says you shouldn't look at your total balance. Even if it's $10,000. The trick is to concentrate on making progress with your payments and paying a little more each time. That is a more achievable goal -- and one that will eventually bring any balance under control.

4. Think about taking on a side hustle

There are a few aspects to paying down debt. One is to reduce your interest rate so your balance won't grow as quickly. Another is to pay as much as you can toward your balance. That can involve cutting spending to free up cash. It can also mean trying to earn more.

A lot of Orman's advice is based on a belief that if we just cut non-essential spending and/or work harder, we'll have more money for debt payments or savings. If you're living paycheck to paycheck and already using your credit card for essential bills, that can be a hard pill to swallow. But if you can find a way to bring in some extra cash, it really could help.

It isn't easy to carve out extra time, especially if you already work hard and have other commitments such as family. But Orman points out that spending five to 10 hours on a side gig could bring in more money. It's particularly powerful if you pair it with a balance transfer deal to pay down more in that interest-free period.

Bottom line

If you are looking for ways to tackle your credit card debt, congratulations. It isn't easy, but thinking about how you'll do it is the first step. Suze Orman speaks from personal experience when she tells her followers that it can be done. If she can get out of five-figure debt, so can many of us.

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