by Christy Bieber | Updated July 21, 2021 - First published on Sept. 15, 2019
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This credit card mistake can cost you a fortune. Are you one of the millions of Americans who’s making it?
Credit cards can help you out financially in a number of important ways. If you use your cards responsibly, you can build credit with them. You can also earn rewards or cash back points so that you benefit financially from your spending.
Unfortunately, many Americans aren’t using their cards very strategically or responsibly. In fact, close to half of all Americans make a serious and costly mistake with their credit cards, according to a recent survey by Charles Schwab.
What’s the mistake? Read on to find out.
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According to Schwab’s 2019 Modern Wealth Survey, carrying a credit card balance is the mistake that millions of Americans are making.
In fact, the survey revealed that 44% of all Americans typically carry a balance on their credit cards. This is significantly more than the 32% of Americans who indicate they never do.
Carrying a credit card balance on a regular basis is a big mistake for a lot of reasons. Here are just a few of them:
As you can see, there are lots of reasons not to carry a balance on your cards. But what if you already are?
In this situation, it's a smart move to pay off your debt ASAP so you can avoid paying the interest costs associated with credit card debt -- as well as its other downsides. You’ll want to make much more than the minimum payments, putting as much as you can toward your credit cards to pay them down quickly.
You can use the debt snowball method, which focuses on sending extra payments to your lowest-balance debt first, before moving on to the next smallest debt. Or the debt avalanche method, where you send extra payments to the card with the highest interest rate. As you pay off each debt, increase the payments you’re making to the next one you’re focusing on until all your debt is gone.
Transferring the balance of your high interest credit cards can also be a good idea. You could apply for a balance transfer credit card that offers a 0% promotional rate on transferred balances for a limited time. Move the balance of your existing cards over to the balance transfer card and try to pay them down before the 0% rate expires.
Or you could take out a personal loan to consolidate and refinance your credit card debt. Both of these options should ideally leave you with just one new loan to pay at an interest rate well below what your cards currently charge.
Now you know why carrying a credit card balance is a bad idea. And, if you’re one of the millions of Americans that routinely carries a balance, you also have some suggestions for getting rid of it. You can work on paying off your debt ASAP.
Going forward, you can commit to not charging more than you can pay off in full when your statement comes. That way you won’t make this common and costly mistake in the future.
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