Credit debt can have a lasting impact on your life, even if you’re paying your monthly fees on time. Credit cards often charge high amounts of interest, which makes them horrible for building up fees and debt over time. If you miss a single payment, you could find that the charges well outweigh what you paid last month (or even longer).
Some people complain that they feel trapped with credit debt, and those complaints have merit. Credit cards have high-interest rates because of the fact that they’re unsecured loans, but those high-interest rates can cost as much or more than your monthly payments. In fact, some people find that they have made all their credit card payments on time but somehow ended up with a higher balance than when they started.
In the first quarter of 2019, it was found that credit card interest rates averaged out at 17%, based on information from the Federal Reserve. That’s around 35% higher than rates were just five years ago.
As a consumer, you should know that your credit score impacts your interest rate. If you have a higher credit score, you’ll likely have an interest rate that is lower. That’s because you’re less likely to default on the loan. If you want to avoid high-interest rates or paying back interest, you will need to pay back what you owe in full each month. You can also work to lower your rate by negotiating a lower rate or improving your credit score over time.
If you find that you’re struggling with credit debt despite paying what you owe, you may want to look into options such as a consolidation loan or bankruptcy. Our website has more for you to explore this important topic.