Do you understand your credit cards’ interest rate?
If your answer is “no,” then know that you’re not alone. In fact, a new study from Gallup states that up to 30 percent of all Americans don’t understand their credit card interest rate — and this isn’t good, as this rate is a key number that any credit card holder should understand as it pertains to their financial wellbeing.
Credit cards, as you know, have very high interest rates, and the greater the balance you carry over month to month, the more interest you’ll be paying in the long run. In fact, the average credit card interest rate is a whooping 18 percent these days. Don’t count on the credit card companies to help educate you on your interest rate, it behooves them if you’re in the dark with it. We’ve got you covered though, as we’ll break down that — and more — in this post.
Credit Card Debt Explained
You’re a dream consumer for a credit card company if you charge most of your purchases and only make the minimum payments on your statements each month. That’s how the credit card companies make their money — by hoping that you’ll carry balances from statement to statement. But if you continue to accrue high-interest debt, it’s not going to go well for you — even if you’re among the few Americans that have a manageable interest rate.
The good news is that your interest rate is on your statement, though the credit card companies tend to bury that important number in the fine print so it’s a tad more difficult to locate. If you can’t locate it on your statement, a phone call into customer service with the inquiry will get your question answered. But let it be known that the credit card companies typically won’t be too helpful in terms of sharing it and explaining it to you unless you contact them.
Getting Out of Credit Card Debt
If you’re in credit card debt, you’re not going to get it out of it quickly just by making the minimum monthly payment. In a perfect world, that’s what the credit card companies want you to do so they’ll make more money off of you in the long run.
Instead, what you’ll want to do is come up with a debt management plan. When it comes to paying off debt, you want to pay off any high interest accounts first, and usually credit cards top that list. We suggest refraining from using any credit cards with high balances on them and transitioning to debit or cash-only buying habits so you’re only spending what you have. This will ensure you’re not using the high-interest credit cards as you’re paying them off, essentially preventing you from accruing even more debt on top of what you’re trying to pay down. To reduce debt, other measures may be necessary, such as making lifestyle changes or learning to live without costly things you’ve been accustomed to. Paying off credit card debt is a process.
Other Common Money Woes
Aside from not knowing a credit card’s interest rate, there are a few other notable financial mistakes or oversights that many Americans are guilty of. Here’s a look:
- Not saving for retirement: Retirement planning can take decades, which is why it’s important to start investing in a 401K or IRA as soon as you have the opportunity to do so. Don’t bank on being able to live on Social Security benefits, there’s likely a long time between now and when you’ll retire. A lot can change in that time.
- Not dedicating a savings fund (and allocating toward it): It’s estimated that only about 60 percent of all Americans would be able to pay out-of-pocket for a $400 unexpected expense without charging the purchase or borrowing the money from someone else. That’s a problem. Everyone should be building not just a savings account, but an emergency fund with three to six months’ worth of expenses in it.
How do you check up from a financial perspective? Now’s the time to put in the effort to better understand the things that are most important to your wellbeing.
Regards,
Ethan Warrick
Editor
Wealth Authority
