Use a Credit Card? Here’s Why It Might Be Costing You Over $900 Per Year
Credit cards are like matches. They’re awfully handy to have around, and there’ll be times when you really need one.
But if you’re not careful, they can burn you.
Too many people get singed when they let their credit card use get out of control. Americans’ total credit card debt continued to climb throughout 2017, reaching an estimated $905 billion — a nearly 8% increase over the previous year, according to a NerdWallet analysis.
More than 60% of credit card users carry an unpaid balance from one month to the next, paying interest at double-digit rates, the analysis found. As of mid-2017, the average U.S. household with revolving credit card debt carried a balance of $6,081.
“Assuming an interest rate of 14.87% — the current average — that balance would incur $904 in interest per year,” says NerdWallet.
How to Stop Wasting Money on Credit Card Interest
How can you avoid paying all that credit card interest? Your best bet is to cut back on your expenses as much as possible, and pay off your balance as soon as you realistically can.
Simple, right? Just kidding.
Here are some other steps you could take:
1. Figure out What You’re Dealing With
Map out your debt.
Which companies do you owe money to? Are any of your debts in collections?
An easy way to do this is to sign up with a free service like Credit Sesame. It shows your balance on any unpaid bills, credit cards or loans. It also offers tips to reduce your debt and raise your credit score.
2. Choose the Best Rewards Credit Card
If you use credit cards responsibly and pay them off each month, you can reap the rewards. But with so many cards offering different kinds of rewards deals, it’s easy to get lost.
We’ll start you off with one recommendation: the Chase Freedom Unlimited card.
Its claim to fame? You’ll earn an unlimited 1.5% cash back on all your purchases. Plus, if you spend $500 in your first three months of opening the card (hi, groceries), you’ll pocket a $150 bonus. There’s no annual fee, either.
We checked Credible’s annual rewards calculator, and it estimates $417 in annual rewards based on our spending habits.* (You can enter your unique spending habits and see what you’d earn, too.)
Get signed up — 0% intro APR for 15 months — here.
3. Compare Other Cards
Look around at other credit card options. To do this, we suggest trying out Birch Finance, a platform that offers customized recommendations and comparisons.
You connect your current cards to the platform. It analyzes your habits and spits out the best, most optimized card suggestions for you. You can pick and choose from several cards and compare potential rewards.
*Annual Rewards amounts will change based on the amounts you enter. The monthly spending category names and definitions may vary among issuers, and categories may not align one-to-one.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He hates being a revolver.