Having a credit card can come with many benefits, including conveniently paying for purchases, rewards, fraud alerts, etc. However, it also has risks.
Many Americans carry their balances over
According to the Credit Market Monitor Report, which the American Bankers Association published, about 40.7% of cardholders carry their credit card balance into the next month. This can present a disadvantage since the card issuer charges them interest on the balance they carry forward.
It becomes been harder for cardholders who accumulate interest to pay off their debts. As a result, it is not uncommon for people to go into debt because of a credit card. You could prevent this by avoiding interest fees.
Studies have found that Americans have an average credit card balance of $5,525. For this reason, many people spend money paying off their interest. However, it is not difficult to avoid interest. Moreover, it could save you a lot of money.
The best way to avoid paying interest is to pay off your balance. Contrary to popular belief, carrying your balance over to the next month does not raise your credit score. It will make you spend more on interest, which might be bad for your score if you go into debt.
If you have a hard time clearing your balance every month, you might be living above your means. For this reason, you have to cut back on spending.
It would help if you also tried to pay your bills on time. Try to pay the minimum at least to avoid late fees. Moreover, skipping two consecutive payments will lead your card issuer to increase your interest rate on new purchases and your balance which might make it harder to pay off.
Getting a new credit card could help you avoid interest
Another way to avoid interest is to open another credit card account. This move can be helpful if you need to make a big purchase and want time to pay it off. However, for this to work, you have to own a card with an introductory promotion that waives interest.
An introductory promotion could last anywhere between 15 and 21 months. This period gives you time to clear your debt without accruing interest. Moreover, some cards will offer rewards from these purchases.
