Credit Card Annual Fees, Here Is What To Know
September 23, 2021
September 3, 2021
The typical renter seeking the agency’s help carried around $3,000 in credit card debt in 2019, Money Management International found. The average balance so far in 2021 is closer to $25,000.
Others agencies that help those financially struggling report the same.
“We do see people who have $20,000, $30,000, and $40,000 in credit card debt,” said Bruce McClary, a spokesman for the National Foundation for Credit Counseling.
Balances that high can take decades to pay off, experts say.
The minimum payment on that balance would begin at around $588 a month and would decrease over time as the balance dwindled.
1) One way to speed up repayment, Rossman said, would be to continue paying the original, higher minimum payment.
“That would trim their payoff period way back to a little over five years,” he said. “And their interest expense would be $12,443.”
2) For people who owe such large balances, Rossman recommends reaching out to a nonprofit credit counselor. Money Management International, GreenPath, and other members of the National Foundation for Credit Counseling are options.
“They can provide helpful advice and negotiate with creditors on your behalf,” Rossman said.
For example, he said it’s common for people to get a more manageable payoff plan, thanks to a credit counselor, “something like a 7% interest rate over five years.”
Under those fixed terms, someone making payments on a $25,000 balance would be debt-free in five years and will pay just $4,700 in interest.
Be prepared that some credit counselors charge fees for their help, although these costs are usually well worth it when you consider the interest they can save you from paying, experts say.
3) Another option for people with good credit is to take out a personal loan to pay off their credit card debt, Rossman said.
You’ll still be stuck making monthly payments, but hopefully for less time because the interest rates on personal loans can be as low as 5% or 6%, compared with the 16% or more annual fee on credit cards.
4) Those with good credit may also be able to transfer their debt to a 0% balance transfer card.
I believe you should start paying down on your Credit Card debt as quick as possible to prevent it from becoming an overwhelming barrier.
“Just beware that the interest rate ranges from 14.49% to 24.49% after the 0% promo ends,” Rossman said.
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