It is estimated that 80 percent of households in America carry a credit card balance. This can put a drain on one’s finances. The high interest rates make it difficult for people to pay off their credit cards. The median interest rate is around 21 percent.
It is important to look at a credit card the same way that you look at a loan. If the credit card interest rate is 21 percent and you use it to buy dinner, then you essentially took out a high-interest loan to buy dinner. Americans pay $104 billion in credit card interest and fees every year.
The high interest rates are what keep many people in debt. However, there are some ways that you can pay off your credit card debt. You may want to get a balance transfer. Some credit card companies do not charge you a fee for transferring the balance. You may also be able to avoid interest for up to 15 months.
Here is an example of how a credit card balance transfer can help you save money. Your credit card has a balance of $5,000. You are trying to pay this card off in 15 months. The interest rate is 21 percent. You will have to pay $400 per month to reach this goal. You will also end up paying $692 in interest.
If you transfer the balance and do not have any interest, then you can reach your goal by paying $333 per month. The key is to avoid making any new purchases while you are paying off the balance.
You will need to apply for a new credit card in order to get a balance transfer. This may cause your credit score to drop a few points. However, you will eventually be able to improve your score by paying off your debts.