Crucial Reasons to Avoid Buy Now Pay Later Schemes
December 2, 2021
Which debts should be prioritized and paid off first
December 13, 2021
Credit cards are convenient; in some cases, they are saved for emergencies. For others, they are just another way of spending on things they want. Whatever the case may be, however, credit cards have one rather interesting bottom line: the debt incurred on them can be tough to pay off entirely.
This can usually be chalked up to how interest is charged.
How Is Credit Card Interest Compounded?
Interest in credit cards tends to compound every day. A credit card with an interest rate of 20% annual percentage rate (APR) has to be divided by the days in a year for the interest per day amount to be determined.
Based on the example, that’s 0.054% a day.
This equation is based on the way interest rates are typically displayed as a percentage rate on a yearly basis. In some cases, people take monthly compounding into account, as the difference is not that much. It will then look like this:
20/12 = 1.66 a month.
The outstanding balance is used as the base calculation for what they will be charging for interest.
What Is the Best Way to Address Credit Card Debt?
- Determine the actual figure of how much is owed in total.
- If there is more than one credit card, determine the total figures per card then altogether.
- Review the interest charged by the credit card. It may vary per bank.
- Pay in a timely manner above the expected minimum.
How Can Credit Card Debt Be Paid Off Quickly?
- Be Prepared to Give Things Up
There is really no way around this; sacrifices must be made. Exactly what this is will depend wholly on the person’s lifestyle. In some cases, that involves cutting down on gourmet coffee, online shopping, collecting shoes, and the like.
Social outings and vacations may have to be replaced by situations that are not necessarily comfortable. However, they can very well be helpful, such as taking on a part-time job or a secondary one.
- Go Above the Minimum When Paying It Off
Paying more than the minimum every month will go a long way. Choosing a significant amount and sticking to that will help the total go down much faster.
- Stop Using a Credit Card
A boat will not be able to stop sinking if the hole causing the leak does not get filled or plugged in. In the same vein, credit card debt will simply not stop if there are new charges still being made. People that have particular attachments to their credit cards or have a penchant for shopping will do well to take the extra mile. The physical act of cutting up a credit card may go a long way psychologically.
Conclusion
Credit card debt is a serious issue that seems endless, largely due to how interest is charged. Addressing it should start with determining the total amount owed and reviewing the interest charged. Paying it off quickly involves paying above minimum, being prepared to make sacrifices, and no longer using a credit card altogether.
Need help with managing debt on your credit card? Debt Helpers offers a range of consulting services and debt solutions designed to help people stay on top of their finances. Reach out today!