If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
by Maurie Backman | Published on Oct. 23, 2021
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
If you have credit cards, here's one situation you should try to avoid.
Credit card companies don't operate out of the goodness of their hearts. Rather, their goal is to make money, and they do so in several ways. These include charging annual fees to credit card holders, imposing fees for cash advances, and collecting interest on balances that are carried forward.
The latter is a huge source of income for credit card companies. In fact, a new report by The Ascent reveals that in 2020, the credit card industry took in $76 billion in interest income alone. That's a great thing for credit card companies, but for the consumers who had to pay that interest, not so much.
If you routinely carry a credit card balance rather than pay off your cards in full every month, you should know that you're boosting credit card companies' earnings -- and hurting your own finances in the process. And that's a mistake to avoid whenever possible.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Sometimes, credit card balances are unavoidable. If you run into a financial emergency and don't have the money in savings to cover it, you may have no choice but to carry a balance on a credit card temporarily.
But some people end up carrying credit card balances not because unplanned expenses arise, but because they don't do a thorough enough job of tracking their spending. And that's a scenario you should try not to land in -- especially if money tends to be tight.
So how do you avoid carrying a credit card balance? First, set yourself up with a budget to follow. That budget should account for your various expenses, including those that may not pop up every month (like holiday spending). Knowing how much you can afford to spend in different expense categories could help keep your credit card balances in check.
Next, make a point to check your credit card balances every week. It's easy to swipe a credit card at the store and forget how much your total came to a day later. But if you review your spending regularly throughout the month, you may be able to avoid charging more and winding up with a bill you can't pay in full.
Finally, do your best to build some emergency savings, whether by cutting back on expenses temporarily or getting a second job and using your earnings from it to pad your bank account. If you have cash reserves to fall back on, you'll be less likely to have to charge expenses on a credit card in an emergency. And you'll have some money to dip into if there's a month when you have to spend more than expected.
While credit card companies love collecting interest, paying it means tossing away money you could otherwise put to good use. It's important to do what you can to avoid carrying a credit card balance. That balance could really hurt you financially, especially if you end up carrying it for a long time.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2022 The Ascent. All rights reserved.