Are You Paying Too Much Interest on Credit Cards?
As a nation, Americans love the convenience and flexibility of paying by plastic, but what we do not love are the interest fees on credit card debt!
There are faster and smarter ways to repay these particular debts, including budgeting more effectively, comparing card rates and taking advantage of 0% balance transfers at Moneysupermarket.
The US census bureau reported in 2010 that an average card holder has credit card debts of over $5,000 dollars and American Consumer Credit Counseling suggest that the average interest rate is 18.9%.
When you are trying to save money for a large long-term purchase, such as a house or your education, paying off interest on your credit cards can hinder your efforts.
You can create a healthier financial situation by just putting a little time and effort into doing some math – or letting the spreadsheet do it for you – and making a plan of action.
Firstly, make a list of credit cards and how much is owed on each, plus the interest rate. This is known as the APR, which stands for the annual percentage rate that you pay.
Check balance transfers at Moneysupermarket for suitable cards, prioritizing those that offer 0% transfers and 0% or low APR for the longest time period. The longer the time period, the better!
Calculate whether you can amalgamate all your credit card debt and put it onto this one card. If the credit limit is not high enough, consider applying for two cards.
Remember, however, that your new credit cards are for the purposes of paying off debt more effectively, not for you to be able to treat yourself to luxury items, however much you may be tempted.
Late fees can be costly on credit card repayments, so consolidating your debts onto one card should help you stay on top of your monthly repayment date.
Missing even one monthly repayment can affect your FICO score, which is your credit rating score. Miss more than one repayment and your score will begin to tumble further.
This means that you will lose some of your purchasing power. Creditors will see you as unreliable and you will be penalized by higher rates of APR as standard.
It is far better for you to use the beneficial rates to begin carving away at your debts. Experts suggest paying the minimum repayments on all cards except for one.
Pay off one card at a time, beginning with the card with the highest APR. Pay as much as you can each month off the balance, even if it means sacrificing treats or working overtime.
When you have paid off the first card, you will then have more money to plough into the next one. As your debts decrease, you will have more money to clear each balance.
Then you will find yourself debt free and able to put more into your savings account. The process may not be quick or sometimes that easy, but it will be well worth it.
