40% of credit card debtors don’t know the interest rate, according to Bankrate
Many Americans are unaware of an important aspect of their credit cards.
Of those with a balance, 40% don’t know the interest rate they’re charged on their primary card, according to a new survey from The bank rate find.
It could end up costing them a lot of money.
“As much as we’ve heard about record rates on other products, credit card rates are already high and are likely to increase,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.
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The average credit card rate is 16.3%, according to Bankrate. With the Federal Reserve planning to raise interest rates this year, credit card rates will further average 17% by the end of the year, predicts Rossman.
Still, those with balances tend to have even higher rates, possibly due to lower credit scores, he said. The valued interest accounts had an average 17.13% interest rate in the third quarter of 2021, according to the Fed.
At the highest rate, if you’ve made minimum payments on the average credit card balance – that’s $ 5,525, depending on Experiential – it would take you 16 years to pay off the debt. You would have owed more than $ 6,500 in interest, based on the calculated discount rate.
What to do
To pay off your debt as quickly as possible, you have several options.
The best way is to transfer it to a zero-rate credit card, which can defer interest for up to 21 months, suggests Rossman.
“They have been very difficult to obtain in 2020,” he said. “Lenders were very concerned about the risk.
“Now there is a lot of competition again,” added Rossman. “You can use this to your advantage. “
Also consider increasing your income to pay off debts, such as getting by or trying to negotiate a raise at work.
If you can’t get a zero-rate card, consider a personal loan as a form of debt consolidation, suggests Rossman. While there is no zero rate, if you have good credit it could potentially be 5-7%. The term can be up to five years.
For those who need help, consider nonprofit credit counseling, which can help you with your debt management plans. You don’t necessarily need good credit to qualify, Rossman said.
One thing you shouldn’t be doing is focusing on credit cards that offer rewards.
While they’re great if you pay your bill in full each month, your first priority should be paying off your debts, Rossman said.
“Don’t run after the cash back rewards if you pay 15-20% interest,” he said. “Keep hunting for rewards until you are debt free.”
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