![]() Once the smaller debts are paid off and you have built a habit of paying off debt, the money you were used to putting aside every month can then go toward larger debts. Elena Pelayo, educator at How Money Works, a financial literacy organization, recommends that even if you live paycheck to paycheck, you might want to add at least $10 above the minimum payment of your credit card with the highest interest rate.Īnd if you can afford it, she recommends paying 10% more than the minimum payment per month.Ī well-known payment method is the ” debt snowball ” where you pay down your debts from smallest to largest, to build momentum and good habits. ![]() If your income just covers your necessities, reducing credit card debt can be challenging. Other debt payoff strategies include taking a low-rate personal loan as a form of consolidation and pursuing a debt management plan offered by a reputable nonprofit credit counseling agency such as Money Management International, he said. “Put your interest rate first and pursue rewards once you’re debt-free.” “It doesn’t make sense to pay 20% in interest just to get 2% in cash back,” McBride said. These allow you to transfer your higher interest credit card debt to a low interest credit card, and some offer promotions up to 21 months.īanks do sometimes charge a flat fee, such as 3% of the balance transferred. To figure out your APR, you can log in to your online banking account, look at your financial statement, or call the number on the back of your credit card, Alev says.Īfter that, both Alev and analyst Greg McBride of advise signing up for a credit card that offers a zero percent interest or low interest balance transfer promotion. “If you are carrying a balance month to month, that balance just got more expensive,” she said. How do I find out the APR on my credit card?Ĭourtney Alev, consumer financial advocate at Credit Karma, said that knowing the Annual Percentage Rate, or APR, on your card is an important first step for anyone looking to get out of credit card debt. If your APR increases by a percentage point, paying off your balance would take two months longer and cost an additional $215. ![]() If you don’t carry a balance from month to month, the APR is less important.īut if, for example, you have a $4,000 credit balance and your interest rate is 20%, if you only make a fixed payment of $110 per month, it would take you a bit under five years to pay off your credit card debt and you would pay approximately $2,200 in interest. So, if you have a 20.4% rate, which is the average according to Bankrate, it might increase to 20.65%. ![]() The latest increase will likely raise the APR on your credit card 0.25%. But the Fed’s rate is the basis for your bank’s “prime rate.” In combination with other factors, such as your credit score, the prime rate helps determine the Annual Percentage Rate, or APR, on your credit card. The Federal Reserve doesn’t directly dictate how much interest you pay on your credit card debt. How does the Fed decision affect credit card debt? Here’s what the increase means for your credit card bill and what you can do if you’re carrying debt: The interest rate increase comes at a time when credit card debt is at record levels. If you have money to save, you’ll probably earn a bit more interest on it, but the increase will make it even costlier to borrow for homes, autos and other purchases. NEW YORK- The Federal Reserve raised its key rate by another quarter point Wednesday, bringing it to the highest level in 15 years as part of an ongoing effort to ease inflation by making borrowing more expensive.
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