Interest on credit cards can be expensive. Here’s how to minimize it.
- Credit cards are known to charge high interest rates.
- There are steps you can take to minimize the amount you pay, such as negotiating with your credit card companies and taking advantage of 0% introductory rates.
Some people accumulate balances on their credit cards because they lose track of their spending or fall victim to too many impulse purchases (which can happen to the best of us). Other times, credit card balances pile up when unexpected bills pop up out of the blue (thanks, aging car).
The problem with a credit card balance, however, is accumulating interest charges which could be extremely costly. But here’s how you can minimize the amount of interest you pay on your cards.
1. Settle your balances as soon as possible
Sometimes carrying a credit card balance is unavoidable. But if you land in that boat, the sooner you pay off the amount you owe, the less interest you’ll accrue.
If you’re currently sitting on a large balance, look at your budget and identify expenses you can cut a little to free up some cash. At the same time, consider getting a temporary hustle and using your earnings to reduce your balance. You can drop that second gig once you’re debt-free if it’s too stressful or time-consuming. But busying yourself with a side job for a month or two could save you a world of credit card interest by allowing you to pay off your debt sooner.
2. Negotiate your existing interest rates with your credit card issuers
If you read your credit card agreements carefully, you will see that your card issuers are entitled to charge you a certain amount of interest on the carried forward balances. But that doesn’t mean you can’t negotiate with them.
If you’ve been a cardholder in good standing for a while, a credit card company might agree to lower the interest rate on your debt. Why? It’s simple. Credit card companies make money by collecting interest (and other fees). Your credit card issuer may prefer to collect some interest from you than no interest, which could happen if you decide to consolidate your debt and pay it off in another way, such as taking out a personal loan.
3. Perform a balance transfer
If you owe money on your credit cards but have decent credit, you may qualify for a balance transfer. And if you can find one with a 0% introductory APR, you’ll have a real opportunity to save money on interest.
Of course, introductory APRs only last so long. The offer you qualify for may only give you one year of 0% interest. But even if you only get a one-year reprieve, it’s still better than nothing. And if you’re able to pay off your debt during that time, your savings could be huge.
The option to pay off a credit card balance over time is undoubtedly convenient. The downside, however, is accumulating interest charges which could amount to quite a large sum. These tips could help limit the amount of credit card interest you accrue and waste less of your hard-earned money.
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