Now that the interest rates of credit cards are at an all-time, record high, it is easy for holders of these cards to end up spending hundreds and even thousands of dollars each year on finance charges.
The debt that is capable of accumulating is very expensive. In addition to this, you can keep spending on those cards, despite owing a balance. This means that the amount of debt that you accumulate could grow very quickly. In this guide, we here at Somerville Bank will provide you with some strategies on how to save on credit card interest.
Pay the Full Balance Each Month
If you make it a point to pay the full balance on your credit card bill each month, balances will not carry over to the next month. This means that you will not owe any credit card interest at all. Remember, though, it is very easy to spend more than you are able to afford to pay back all at once. This is because when you use a credit card, it feels different and less tangible than losing regular cash. You should log in and check to see how much you have charged on your credit card a couple to a few times a month to ensure that you are staying within your budget and exceeding that which you are able to comfortably afford.
Pay More Than the Minimum Payment Required
When using credit cards, you must remember that the higher the balance that you have, the more interest you will be required to pay. If you pay only the minimum payment that is required, most of that payment will end up going towards interest and only a small amount goes towards your balance. If you want to pay less interest, you should definitely pay more than the Minimum balance that the credit card company requires.
Transfer the Balance You Have to a Card with a Low Interest Rate
You are capable of moving balances on cards that have a high rate of interest to a credit card that has a lower interest rate. If you are able to get approved for a credit card that comes with a promotional offer of 0% APR, you will save even more money. That are specially-designed balance transfer cards available that offer this type of promotion for as many as 21 months. This gives you additional time to pay off the balance in order to avoid interest. Be cognizant of the fact that some of these types of cards have a balance transfer fee. Many include an annual fee, too. The additional fees will basically offset savings in interest if they are high.
Get a Personal Loan or a Debt Consolidation Loan
If you lack the credit history to qualify for a balance transfer credit card, consider getting a personal loan or a debt consolidation loan. You may then, in turn, use this loan to pay off the credit card balances and that amount would be a lot less than if you continued to pay each credit card each month. These loans typically have a lower interest rate. Furthermore, you would have just one monthly payment at a lower payment and rate than you would if you paid each card individually.
Make Multiple Payments
If you would like to reduce the amount of money that you pay on your credit card, you may make multiple payments a month. This helped to reduce the average daily balance. This balance is what credit card companies typically use in order to calculate the amount of interest that you will pay at the end of the month. If you have a $1000 balance and you have $500 to go towards your credit card that month and you pay the $500 at the end of the billing cycle, you would reduce your daily balance by $250. You may look up a free credit card payment calculator online in order to help you determine how paying more often will directly impact what you owe.
Use Your Savings
If you are saving money in your savings account, it may feel awkward and counterproductive to take the cash from that account in order to reduce the amount that you owe with your debt. If you have built up that account, though, you should do it. The main reason is, you will not earn that much in interest – even with a savings account that is high yield. The amount you pay on interest on your card’s daily balance will always be more. So, if you have some money saved up, put it towards your balance to reduce your average daily balance so that you pay less interest in the end.
Ask the Credit Card Company for a Lower Interest Rate
If you want to lower the amount of interest that you pay on your credit cards, you should call the issuing company and ask for a lower interest rate. While you may succeed in this endeavor, many may only do it for a shorter period of time it could be for the duration that you pay back what you owe. If you have a poor financial situation and the credit score you have had increased since you opened the card, you may find that you qualify for a lower interest rate or if you have a perfect payment history, and you tell the company, this could help you get a lower interest rate. You should do a little research to see what is in your favor when calling your credit card issuer. Even college students can do this.
No Cash Advances
You may not realize it, but APRs are higher with cash advances. In most instances, these types of advances do not have any type of grace period for paying the amount advanced or any time period where the interest rate is lower. If you want to pay less interest, definitely avoid getting a cash advance on your credit cards.
Make Early Payments
If you want to avoid paying high interest rates on your credit cards, you may want to make your payment earlier within the payment cycle. By doing this, you will reduce the average daily balance on your card, which will immediately reduce the amount that you pay on interest.
Create a Monthly Budget
Credit cards make overspending easy and likely. It is important to always remember that you have to pay back what you charge. By establishing a monthly budget, you will be able to account for all of your expenses each month and you will know exactly where your monthly income will go. In addition to this, you can stay on track with your finances. There are budgeting apps online that you may utilize in order to track all of your spending. Additionally, many apps are designed to show you where you can cut costs. This will help in freeing up more money that you may use in order to pay off all of your debts.
0% APR Offers
If you want to reduce the amount of interest that you pay on your credit cards, maybe you should consider those that have a 0% APR offer. These cards will help you in consolidating what you owe and in paying off what you owe much faster. In terms of offers, the best will give you an intro period of up to 21 months. If you do not pay the balance off within the designated intro period time line, you will have to pay interest on whatever balance is left so be sure to keep this in mind. These cards are usually only available to individuals that have good credit, so make sure your credit score is in order prior to taking this step.
Conclusion
As you can see, while credit cards are useful types of financial tools, they may lend to acquiring massive amounts of debt. The best way to use these cards is to pay off the balance each month. If you cannot do that, you could negotiate a lower interest rate or even getting as 0% interest card to transfer your balance to from your credit card debt. If you would like to learn more about financial matters – such as low-interest rate credit cards, bank accounts, loans, and other tools – contact us here at Somerville Bank and speak to one of our financial advisors.
About Us
Somerville Bank was established as Somerville National Bank in the year of 1910. It served the Southwestern area of Ohio at that time. In January of 2018, we become an unchartered bank and changed our name to Somerville Bank. We will offer a wide assortment of individual and business financial products. We also have many different locations now. Our senior management team has consisted of the same people for over 20 years and each of them have over 30 years of experience in the industry. Click on the following link now to find a location near you and come on in and see us or just give us a call. We look forward to serving you! https://somervillebank.net/locations/
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