After a year of massive interest rate increases, the balances Americans are carrying on their credit cards are likely to generate substantially more interest expense in 2010 than many would like to confront. Just how much interest the average person will pay this year varies on which statistic you choose to measure. A widely used number of $8000 of credit card debt per U.S. household being charged the current average interest rate of 14% will likely spend around $1,000 just to pay credit card interest. At a 20% interest rate, the “Average Household” will spend close to $1500 just to keep up with interest.
Of course, the “Average Household” is a statistic. Every household is different, and the amount you owe and the rates you pay are likely to vary significantly from the averages. One tool available to estimate interest expense over the course of a year is the balance transfer calculator at Smart Balance Transfers. This tool provides an estimate of how much a person will spend on interest at current rates vs. how much they would save by utilizing a 0% balance transfer for 12 months.
Using this balance transfer calculator, the “Average Household” could realize more than $1000 in interest savings by transferring their debt to a credit card with a 0% rate for 12 months. Once balance transfer fees are taken into consideration, the total savings decline to around $700. However, the benefits of doing a balance transfer go beyond one year. Without compounding interest expenses, payments towards debt reduce the principle at a much faster rate, thus leaving you with less debt at year end, even if you make the same monthly payments.
Ultimately, consumers with good credit could easily pay $0 in credit card interest in 2010 if they were to make smart use of balance transfer credit cards. Unfortunately, the lack of offers being sent out in the mail has caused many Americans to forget that 0% rates are still an option. This is not the case. 0% deals, while nowhere near as generous as they were in the past, are still readily available. Thus, anyone with good credit who shudders at the thought of spending $1000-$15000 in interest this year should look to available balance transfer offers as a means to reduce interest expense and expedite the process of getting out of credit card debt.
-Jeffrey Weber
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