Money Monday - Credit Cards

Credit card debit is one of the most popular reasons people give when asked why they are not saving money. In reality, it's not the credit card that's the problem, it's the interest rate. The average interest rate on a credit card is 18%. To make matters worse, most people are only making the minimum payment each month. Here's an eye-opening little piece of information. If you have a balance of roughly $12,000 on a credit card with an interest rate of 18% and only make the minimum payment each month, it will take you approximately 33 years and 4 months to pay off that card. And that's assuming you don't charge anything else. The most astonishing fact about this is that it will have ended up costing you $29,616 to pay off that $12,000 balance!

The easiest and most effective way to pay off your credit card balance is to get your credit card company to lower the interest rate. Here are some steps to follow to do this:

1. Find out how much interest you are currently paying (take a look at your most recent statement - the interest rate is usually listed on the bottom of the last page in a table)
2. Find out what rates the competition is offering (this doesn't mean apply for a card with a lower rate. It just means find out what is being offered so you have some data when you call the bank. Check out www.bankrate.com)
3. Talk to someone who can make a difference (call the customer service number listed on your statement and immediately ask for the supervisor of the person who answers the phone as first tier support doesn't have the authority to change rates. Tell the supervisor what the competing rates are, and if your bank doesn't lower your rate, you intend to transfer your balance to the competitor)

Lowering your interest rate means it will cost you less to pay off your credit card debt. This is an important part of earning your financial freedom!