Getting Over High Interest Credit Cards

Credit card debt has a way of growing, and it doesn’t take long for it to become overwhelming if you are not careful. Perhaps you have gone over your budget during holiday shopping or taken advantage of a credit card discount offer only to see the balances grow and grow. Or maybe you have moved credit card balances from one “low rate” credit card to another, only to be caught in a never-ending-cycle.  Medical emergencies are also a major way that people add more debt than they can reasonably pay onto their credit cards.

Often, people spread their debt out among various cards and rates, confusing the issue further. The ups and downs of high credit card debt can hurt you in several ways. It is extremely difficult to pay off, it can damage your credit score and make things you need to finance such as vehicles or home loans actually cost more. Depending on where you live, credit card rates can be as high as 34.99%! At a rate that high it can be nearly impossible to make headway.

Consider the following table. While the debt and payment percentages are the same, the amount paid over the life of the debt is vastly different. For this example, the borrower would like to just keep the payment low, so is paying a minimum 2% every month.

Balance Time Period Annual Percentage Rate for 36 Months Minimum Monthly Payment Interest Paid Amount Owed
 $5,000.00 36 Months 20.45% 2% Payment  $2,896.84  $4,529.78
 $5,000.00 36 Months 15.99% 2% Payment  $2,114.03  $3,970.43
 $5,000.00 36 Months 6.99% 2% Payment  $824.16  $3,038.72

As you can see, the top rate of 20.45% ends up costing the consumer $2,000 more. This example also assumes that the percentage rates are fixed. Fixed credit card rates are rare thing as the majority of credit card rates are variable, based on an index that may rise or fall.  Also notice that the amount owed after three years still remains more than half of the original debt.

 

If a person was planning to pay off their debt in three years, the chart would look like this:

Balance Time Period Annual Percentage Rate for 36 Months Monthly Payment Interest Paid
 $5,000.00 36 Months 20.45%  $192.00  $1,664.66
 $5,000.00 36 Months 15.99%  $177.00  $1,247.83
 $5,000.00 36 Months 6.99%  $155.00  $554.55

Notice that the monthly payment is not all that much different, but the difference between the 20.45% and 6.99% cards in interest paid is about 300%. While zero percent credit cards may start without charging any interest, they eventually do. If a borrower has not started to pay down the debt, it can be a very real challenge to pay it all off once those rates kick in.

Currently, ACU is offering a Forever Fixed 6.99% APR on credit card balance transfers. That rate is fixed and can never rise. Any new debt you add to the card is based on your credit score, but if your goal is to pay off your current credit card debt then just transfer the balance and start paying it all off. It’s one of the best ways to maximize your money and a terrific way to start off the year.

If you are interested in opening an ACU credit card and consolidating your credit debt from another card, follow this link to apply now.

ACU Credit Cards

If you are already have an ACU credit card, this link will help you get started transferring balances off other non-ACU credit cards.

Transfer Balance

 

 

 

 

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Credit & Borrowing, Deals & Discounts, Investing & Budgeting, Lifestyle

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