Do you have significant credit card debt? If you’re like most Americans, you do. Even if you seem to have your payments under control, do you know how much you’re really paying in interest? Over the life of your credit card debt, interest can accrue at incredible rates and influence your savings more than you could ever imagine. Read on to learn how to stop high interest from impacting your savings and affecting your wealth.

With the average interest rate on credit cards now at about 15% (and it’s on the rise), it is no wonder that so many people are falling behind on payments and finding themselves drowning in a sea of debt. One reason this debt has gotten so bad in America (one in three households now carries credit card debt of more than $10,000), is a lack of education concerning interest rates and how high interest can impact savings.

 For instance, a credit card holder with a debt of $10,000 and a 15% interest rate who pays a minimum payment of $300 per month toward the debt will take almost 4 years to pay off the total amount, and will pay $3,200 in interest on the original debt of $10,000.

A credit card holder with a debt of $7,000 and a 21% interest rate who pays a minimum payment of $150 per month toward the debt will take more than 8 years to pay off the total amount, and they will spend a total of $14,550 to pay off the debt – that’s more than twice the original debt of $7,000! Continue Reading »

A year ago, the longest 0% balance transfer offers lasted 12 months and many credit card companies were only offering 0% deals for 6 or 9 months. Today, there are two credit cards that offer a 0% APR on balance transfers for 15 months and one that offers a 0% APR for 18 months. These are among the longest 0% credit card offers in history and, in my opinion, they won’t be here for long.

The reason I am concerned about the longevity of these 0% offers is simple. Last year, many major credit card companies lost customers by raising interest rates, cutting credit limits, and adding fees. To make up for all the lost accounts, credit card companies like Citibank have boosted promotional deals to lure in new customers. To keep pace, other companies like Discover have increased the length of their balance transfer offers.

Unfortunately, the very long balance transfer offers available today are essentially a test. Banks are trying to find out what they need to offer to bring in new customers and extending 0% interest periods is just one trick in their extensive toolbox. Generally, tests such as these can last anywhere from a few months to a year or more. However, the uncommonly long length of these deals leads me to believe they will only be available in the short term. Continue Reading »

If you want to reduce credit card debt without paying a fortune in interest, 0% balance transfer credit cards can be an extremely helpful tool.  With a 0% balance transfer, you pay a small transaction fee and no interest for the length of the 0% interest period.  With current balance transfer offers lasting up to 18 months, this can translate into hundreds of dollars in savings and reduce the time it takes to get out of credit card debt by years.

Here’s an example using the Citi® Platinum Select® Card which currently offers a 0% APR on balance transfers for 18 months and charges a 4% balance transfer fee.  A person with $5,000 in credit card debt will pay a $200 balance transfer fee and no interest for 18 months.  Assuming a $100 monthly payment, at the end of the 0% interest period, that person’s credit card debt will be $3,400.  This amounts to a 32% reduction in credit card debt in a year and a half. Continue Reading »

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.  Continue Reading »

Earlier in the year, when credit card companies were raising interest rates into the stratosphere, I started advising consumers to get on the phone and politely annoy their credit card company into lowering their rates.  Many people who were slapped with interest rate increases were offered the chance to opt out of the rate increases by closing their credit card accounts.  However, credit card opt out notices suspiciously looked a good deal like junk mail, and many simply tossed them in the garbage.  A few months later, APRS that were once in the high single digits skyrocketed to 15, 20, or even 29%. Continue Reading »

A visitor recently questioned the effectiveness of using balance transfer credit cards to get out of debt.  His skepticism was well reasoned, as it is hard to fathom just how expensive credit card debt can be.  In my opinion, the visitor was more in denial about how much interest the average person with $5,000 in debt pays over the course of a year then he was about balance transfers.  Similarly, its equally difficult to fathom how long it can take to get out of debt with an interest rate in the mid teens, let alone a default rate in the twenties. Continue Reading »

While consumers with good credit and manageable credit card debt can often utilize 0% balance transfers to quickly and inexpensively extricate themselves from credit card debt, many consumers either have too much credit card debt or lack the credit needed to qualify for a low rate balance transfer.

If you fall into the latter category, the best approach to getting out of credit card debt may be the use of a consumer credit counseling service.  Unfortunately, the web is littered with shady debt consolidation firms promising miracle debt reduction.  Continue Reading »