How to tackle high interest credit card debt
Average American has about $5,700 in credit card debt
(InvestigateTV) — Interest rates hit a 22-year high this summer, with the average credit card interest rate surging to just over 28%, prompting consumers to look for ways to cut costs.
Nathan Grant, a senior finance industry analyst with MoneyTips, said aside from working on things like improving credit scores and bolstering savings, consumers should also make an effort to pay down existing debt.
“You really want to avoid paying compound interest from credit cards by paying down those balances,” Grant said. “I know it’s easier said than done. So, say pay off your balances involved, but that’s really where the damage comes in because no matter how high your credit cards’ APRs, the interest is only charged on balances carried month to month.”
Credit card rewards are great, but Grant said the benefit is lost if you’re carrying over debt each month.
The best bet, he said, is to stop using any credit cards with a balance.
“So, I think going into the holiday season, you really want to focus on the fact that if I’m choosing to use my credit card for this and I know I’m not going to able to pay off, I’m basically going to be paying even more just because of the nature of compound interest and how it works,” Grant explained.
Grant shared several tips for combating high interest rates:
- Focus on building a savings account of $500 dollars so cash can be used in the future instead of credit cards
- After hitting the $500 mark, try to save $1,000 for emergencies
- Make an effort to increase credit scores so that lower interest rates can be accessible
MoneyTips has additional information on how to pay down debt.
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