Even if your credit card debt seems manageable, are you really aware of how interest payments affect your wealth in the long run? The cumulative effects of debt interest can impact your savings more than you think.
Credit card debt is a fact of life for most Americans. In fact, one in three households carries credit card debt of more than $10,000. Add to this the fact that the average interest rate on credit card debt is nearly 15% and rising, and we can see a potential for economic catastrophe. One solution to this looming crisis is education – more Americans need to learn about the potentially destructive effects high interest payments have on their wealth, and what they can do about it.
One solution that makes sense for many credit card holders is a balance transfer. Balance transfer offers are available from most credit card issuers and have introductory rates as low as 0%. For a reference of what a 0% balance transfer can mean to a credit card holder who carries a high balance, consider the following:
- A credit card holder with a debt of $5000 at a 15% interest rate and who pays a minimum payment of $200 per month toward the debt will take nearly 3 years to pay off the total amount.
- That same credit card holder who transfers his balance to a 0% interest rate for one year making that same $200 a month payment, and whose rate then returns to 15%, will have his debt will be paid off 5 months sooner… and will save more than $600.
What if the $5000 debt carries a 20% interest rate?
- The credit card holder who transfers his 20% debt to a 0% card for one year and makes his monthly payment of $200 will find his debt paid off 6 months sooner, for a savings of nearly $800.
These options for credit card interest and debt savings are available to any card holder with a good credit history. In these financially difficult times, any savings that we can reap from 0% balance transfers is worth taking. Knowing your options for saving money on your credit card debt can mean money directly back to your bottom line.
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February 24th, 2010 at 12:17 am
Thanks for posting the article. Yes, many Americans have a debt problems and so this post can be a good things to pay off their debt and starts a new savings. It’s better to live a life without any stress. If debt is still there in life, no matter low or high, nobody can live a happy life.