How to Save on $7KI Paying Loan Interest

If you have credit card debt, you’re falling into a deep hole every month. The interest rates on credit cards are incredible and are still rising.

“Credit card rates were higher in 2022 than in any other year on record,” Ted Rossman, Bankrate.com’s A senior business analyst told Investor’s Business Daily. On January 18, the average credit card interest rate fell to 19.91%, from 19.85% the previous week, Rossman said.

Rossman predicts the average credit card interest rate will be more than 20%. LendingTree (TREE) has been placed in 22.91%.

Surprisingly, credit card debt is not tied to high income. On average, 46% of cardholders carry a balance from month to month, up from 39% last year. In particular, 37% of cardholders carry a balance of more than $100,000 a year, according to Bankrate.com.

If you’re carrying credit card debt, experts say you should do these four things. First, make sure you know the interest rate of your card, and secondly research cards that offer deals on balance transfers. You may also want to look into credit counseling, a personal loan or a home equity line of credit (HELOC), although most Experts warn against taking out a HELOC.

Credit card debt: digging out can take a decade or more

Still scared? Sorry, but here are some more scary numbers.

The average credit card debt is $5,474 per person, says Bankrate’s Rossman. At first glance it doesn’t seem too bad. However, if that’s your start, and you only make low-interest payments (more than 19% interest) you’ll be in debt for 202 months or almost 16.8 years, says Rossman. And the total interest you will pay is $7,637 (not including the original balance of $5,474).

So if you have bad credit, stop or cut back on all shopping. All you need to buy is a credit balance transaction, some offer 0% interest for 21 months.

Caution: You need proper authorization to get one of these cards. Usually a score 670 marks or above will be done, said Rossman.

And some cards require a “3% to 5% transfer fee,” Rossman said. But if you have a lot of credit and you can get 21 months without interest it can be worth the upfront cost to transfer your balance to one of these cards.

Know Your Card’s Interest and Fees

Unfortunately, cardholders often find their credit card rewards more than their interest and fees.

Bankrate research found that 43% of credit card holders either haven’t changed their previous card or it’s been at least ten years since they switched. And 43% of adults with credit cards don’t know all the interest rates on their cards.

“Credit cards can work for you or against you,” Rossman said. “People focus too much on rewards. That’s a big mistake. The number goes down if you’re paying interest on the balance of the debt.”

And even if you’re not carrying a balance, review your rewards regularly. Mileage awards used to be a popular ticket incentive, but many airlines have dramatically increased the miles required for a free ticket or improved. Refunds may be a better reward now.

Use a Personal Loan to consolidate debt, not a HELOC

If you have accumulated credit card debt, you may want to look to a bank, credit union or reputable online lender for a loan. personal. Then you can use the loan to pay off your credit cards and settle your debt. But remember that the prices and terms for these loans are very different 6% to 36%.

Two tips: Don’t close all credit cards, keep them open and don’t use them, he said Carolyn Warren, author of “Repair Your Credit Like the Pros.” He is a former mortgage broker and credit repair specialist. “Having credit on a credit card is a good thing for your credit score,” says Warren. If you close all your cards, your score will be hammered.

Also, consolidating loans with a personal loan will only help you if you pay off the personal loan in a short period of time. “Stretch out your payments over a longer period of time and you’ll pay more for the money even with lower interest rates” than you would on a credit card, Warren said. And, “never use your credit cards again.”

Also, Warren and other credit experts say not to use a home equity line of credit (HELOC) to pay off your credit cards. “I am 100% against using a HELOC to pay off debt,” he said. If you do, you could be putting your house on the line for spending too much on outdoor food, sneakers and jewelry.

Remember, many homeowners lost their homes in the 2007 housing market because they used them as ATMs, refinanced or took home equity loans.

Commitment to financial strength and financial integrity

According to Warren, those with debt need to commit to a budget and pay down that debt. “You have to write down all the expenses you make and analyze what I need and what I want,” he said.

He added: “If your debt is so high it will take 20 years to pay it off, talk to a bankruptcy attorney.” Bankruptcy laws vary from state to state – an attorney can help you understand your options and rights.

Also, make sure you and your spouse or partner agree on your debt reduction plan.

Financial dishonesty a term now used by financial advisors. Unfortunately, sometimes spouses hide their expenses from each other. “I had a mortgage broker who begged me not to tell his wife about the $40,000 in debt he had on two credit cards. didn’t know,” Warren said.

You need to understand and negotiate all of the family’s expenses, Warren said.

Maybe you don’t see your spouse’s expenses and payment history, but investors and collectors do. And him state of community property A tax collector can fire you because of your spouse’s bad debts, Warren added.