It is time to ditch your high-interest credit cardWritten by Carly Simon-Gersuk
Across 506 million card accounts in the United States, the average credit card debt is about $6,270 (1). This tallies up to $807 billion owed by Americans. That is enough to pay for 200 billion people’s morning coffee.
According to the Federal Reserve, the average credit card interest rate in the United States is 14.65% (2). On average, bank credit card interest rates are over 15% while on our online marketplace we have rates as low as 6.90% in the system now! Undoubtedly, high-interest credit cards can cost you more money than you realize and make it a lot harder to pay off credit card debt. So it is time to check your credit card interest rates and compare them to the national rate.
If you are carrying a revolving balance, paying a lot of interest monthly, or being charged high monthly fees, it is time to ditch your high-interest credit card debt. Here are 3 ways you may be able to switch to lower-interest credit cards.
Switching to a lower-interest credit card has many advantages. For one, the lower rate is beneficial to save you money on new payments and on existing credit card balances. Additionally, lower rate cards are less likely to charge an annual fee. With fewer financial charges your monthly payments can go to reducing your balance, instead of interest. Also, consider transferring your balance to a credit card with a 0% introductory APR period to give you the opportunity to pay down your credit card debt without accruing interest.
2.Raise your credit score
Your credit card debt accounts for almost a third of your credit score. The direct impact of your debt thus affects your ability to borrow money and pay a lower interest rate. Leaving a balance will not help your credit score, so it is best to pay your credit card balance in full each month if you can afford to. Also, consider having multiple credit cards, as long as they are not costing you money in annual fees. It is best to stop using a high-interest or older card and have it open to increase the length of your credit history and credit limit. With a high credit score, you have redeemed creditworthiness and credit card issuers are more likely to approve you for low-interest credit cards since you are less of a risk for them to get paid back.
3.Contact your credit card company
Talk to your credit card issuer; they may be able to offer you lower-interest or some form of assistance. If you are experiencing financial hardship they may be able to reduce your rates or monthly payments temporarily, defer them, or completely wave them. Maybe you want to keep your high-interest card for benefits or deals it may provide, but you can ask the issue to lower the interest. This is a good option especially if you have been paying off your debt and have a good credit score.
With good discipline, credit cards are a great financial tool. A credit card with a high-interest rate can cost you money over time, so ditch it. Explore what low-interest credit card rates you pre-qualify for today on our online marketplace!
Written by Carly Simon-Gersuk