Get financially fit is the resolution of the second most common New Year after weight loss, of course. For many Americans, to obtain financial resources specific to drop the weight of credit card debt.
Even if you have already stumbled and screwed up (or forgotten) the resolution of your New Year, there are more than 10 months in the year to get on the path to financial prosperity.
Start the journey by understanding credit card traps and how to free yourself from the shackles of consumer debt.
no, you do not need to carry a balance
a big myth can cost you the hard earned money. Carrying a balance on your credit card will not help you build a strong credit score. It costs you money in interest payments to the bank.
This myth is probably a misunderstanding by people who fail to understand the difference between the value of a balance and the receipt of a statement.
Yes, you need a load to show on your statement - preferably a small (s) that uses less than 20% of your overall credit limit -. to establish that you use credit and can use responsibly
But as soon as the statement arrives, pay in full
If you carry a balance (aka debt credit card) because you think it helps your credit score -. Stop. Tweet this
It's just cost you money in interest
If you have a balance because you pay more money then you can afford to pay -. Here are some strategies to help clear this debt faster and save you money.
Slash Your interest rate
Believe it or not, banks and loan companies will compete for your debt.
no, it does not mean you can avoid paying. This means the bank B is ready to offer a lot in exchange for moving your debt from Bank A.
Why? Because banks make much money off the interest and Bank B is betting that you will eventually screw up and start it because interest payments.
But if you're smart about it, you can surf your debt around and end pay very little interest in using a balance transfer.
a balance transfer offers usually involves paying a fee for moving your debt from the Bank to Bank B then receive 0% interest (or low) for a defined period of time . - Often 12 to 24 months
during the period of 0% APR, all your payments go directly to the repayment of the principal debt, which means that you can pay off faster and save money on the interests .
Some people hate the idea of paying a fee, but do the math and see if the fee is less than the amount you want to pay in interest to your current bank.
for example, you have $ 7,000 in credit card debt at 17% interest rate and can pay $ 0 per month. It will take a little over four years and will cost $ 2,735 in interest to pay it all.
With a 12 months 0% transfer of the balance with a 3% tax and 15% APR after the promotional period, it will take a little less than 3.5 years and will cost $ 1,155 (including fresh).
many 0% balance transfers with a 3% fee (find another offer after the first end of the promotional period) would cost only $ 438 in interest and fees. And it would be repaid in 38 months.
Use this tool to see if a transfer is worth it to pay you.
avoid the potential pitfalls of a balance transfer
a balance transfer is a useful tool debt eradication, if you use it correctly.
The banks are willing to offer competitive deals such as 0% APR for 15 months because they hope consumers stumble or become complacent and end up paying high interest rates on debt
Here's how to avoid falling into the trap of a potential bank :.
- immediately put the balance transfer card in the freezer - figuratively or literally. Avoid spending on the card while you pay the debt. Usually, purchases made on the card does not receive APR promotional rate of 0%, which is simply more debt
- Please fill out the balance transfer within 60 days - . Otherwise, your promotional rate. may be revoked
- Never miss a payment - or risk losing the promotional rate and that APR shoot back up, or even more, than it was before. Missing a payment also has a significant impact on your credit report and score
- Prepare for the end -. If you have a promotional price of 15 months, but it will take 25 months to repay the debt, find a new agreement before the end of your first promotional rate. balance multiple transfers can help pay off debt faster. Just because you finish a balance transfer does not mean that you have to let your debt at a high APR after the promotional balance ends.
Always pay more than the minimum Duke
If you are not comfortable with the idea of a balance transfer, or it has no sense for the amount of debt you have, then you should pay more than the minimum amount due.
pay only the minimum means most of your money goes directly to interest instead of crop to the principal debt.
It is important to pay more than the minimum due to eradicate timely debt and reduce the overall amount of interest you pay.
repayment of debt can often feel like an insurmountable task, but understanding how working interest on your credit card and how to minimize its impact can mean saving time and money.
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