The average American household carries just over $7,000 in credit card debt. As a result, the credit card industry is booming, earning over $30 billion in profits each year. These profits come mainly from interest and fees.
While the best way to save on your credit card is to pay it off each month, don’t get too discouraged if you’re carrying a balance on your credit card. Here are some of the top ways you can save on your credit card.
Credit card interest rates range from 0% interest for introductory offers to up to 30%, with the average hovering around 15% each month. If you’re paying more than the average on your credit card, it’s time to shop around for a lower interest rate. Oftentimes, you can also negotiate for a lower rate, especially if you mention that you’re going to transfer to a different card.
If you’re paying higher interest because of a poor credit score, the best thing you can do is pay your cards down and avoid adding new credit. This may take some time, but once your credit score goes up, you can start to look for a lower rate or negotiate a lower one with your current credit card company.
While federal regulation prohibits the amount of fees credit card companies can charge you (read more about that here, credit card companies still make a great deal of their money from fees. Late fees, overlimit fees, cash advance fees, and annual fees are just a few. These fees can be particularly harmful because they often start a chain reaction. For example, if you’re at the limit of your balance and are late on your payment, your late payment fee could put you over the limit, incurring an over limit fee as well.
Easy ways to avoid these fees include setting up automatic payments so you never miss a payment and removing your card from your wallet if it’s close to the limit so you’re not tempted to spend it. Additionally, don’t authorize your credit card company to accept transactions that could put you over your limit. This will save you potential over limit fees.
One way to save money on interest is by paying more than the minimum amount each month. The majority of your minimum payment goes towards interest, while a small amount pays down the balance. The longer it takes you to pay off your balance, the more interest you pay. Anything you pay over the minimum each month goes directly to the principal. Even just $5 or $10 extra a month adds up to big savings in the long run.
If you have fairly good credit and are carrying a balance on your cards, consider taking advantage of a balance transfer card. These cards can help you consolidate your credit and save you money on interest. Most of these cards also have an introductory period of 0% interest, so you can save even more money if you hurry and pay off the balance before the interest kicks in.
Here is a list of balance transfer credit cards to consider.
Credit cards don’t have to eat up your monthly budget. By being a savvy credit card holder, you can save on the amount of money you pay in fees and interest each year.