Credit cards are a convenient option for making a purchase online or at a mobile location such as a gas station or restaurant. They provide a safer alternative than using a debit card at an unsecured location. The problem is when you have a “revolving balance” which can ratchet up quickly and leave you unable to pay it in full.
A revolving balance is carried forward to the next month, along with a hefty finance charge. If you do not pay the finance charge each month, it will be added to the balance, and then you will be paying interest on the previous month’s finance charges, a phenomenon known as compounding interest. The longer it takes to pay it off, the better the chance you will wind up wasting money on rapidly accruing finance charges.
To solve this problem, prioritize paying off high interest debt over other, lower interest financial obligations. Take advantage of the following tools that will help you to pay off credit cards faster. Another helpful tip is to reduce expenses until debt is resolved. You will be able to pay it down faster and get back to having the extra income every month.
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Credit card issuers do not advertise this option, but you can call and ask for a lower rate. Reliable customers who pay on time or who have only missed a few payments can often negotiate a lower interest rate, reducing their monthly finance charges.
Check out offers from other credit companies that offer low interest or no interest for a period of time on balance transfers. The goal is to pay off your balance during the zero interest period, netting you a huge savings in the long run.
When you take on high-interest debt, most of your payment goes to the interest charges, so make an effort to pay as much as you can each month. You can address one debt at a time by paying the minimums on other debts while you pay extra on the highest interest debt. Once it’s paid off, you can move on to the next highest rate debt and repeat the process.
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High interest can impact any income level
Even those who rank among the higher income earners can get into problems with credit card debt. If your profession is subject to income volatility, you may use credit to get through the slow months. Everyone gets hit with unexpected expenses from time to time, and it’s necessary to incur debt temporarily. High income credit card debt is as common as the alternative.
The sooner you get control of this issue the better it is for your overall financial health. Professional financial planners can help you develop a strategy to pay down your debts and get back to saving and investing for the future.