ArcaMax

Let’s stop ignoring $1.3 trillion in credit card debt owed by millions of Americans. Perhaps including by you. Even if you stop buying, balances grow like a cancer, because the average annual interest rate on credit cards is 20.75%, according to Bankrate (many cards now charge 29% or higher). In most states, credit card rates are not subject to usury laws that set caps on consumer borrowing rates.

Depending on your card issuer, if you pay only the minimum monthly balance you could be paying for 10 years or more, with interest totaling double the amount you originally charged!

So, what can — and should — you do? You'll read and hear a lot of advice for getting out of credit card debt. Unfortunately, some of the popular recommendations will only make your debt problem worse. Below I list some of the more popular strategies, and I’ve graded them ranging from A to F.

—Borrow from your 401(k) plan: Grade F

Don’t do that! If you think it’s tough to be in debt now, it will be even more painful to be poor in your old age! You won’t earn money on your plan investments while the money is borrowed out of the plan — if your employer even allows loans in the first place. Even worse, if you quit or lose your job with a loan outstanding, it will be considered a withdrawal, subject to taxes and penalties.

—Payday loans: Grade F

These loans are the quicksand of financial debt. They carry exorbitant interest rates, trapping you in a cycle of growing balances.

—Credit card consolidation offers: Grade D

If you’re paying the minimums, your credit remains in reasonably good standing, although you’re in a state of panic. But most of these fix-it programs require you to stop paying on your card debt and to set aside the money you would have paid so the fixers can negotiate a “deal” with the card issuer or debt collector. This process ruins your credit, and with some debts, a lender can file a lien against your home or attach your wages.

—Personal loans: Grade C

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