According to NerdWallet, the average American household has $15,706 of credit card debt. And the average interest rate is 13.49%. If only the minimum payment is made, the borrower will pay $16,537 of interest over 31 years to get out of debt.
There are three ways to get out of debt faster:
Make bigger monthly payments on your credit card. By increasing the monthly payment to $350 in the example above, the borrower would be out of debt in 62 months and would have only paid $5,920 of interest.
Optimize your repayment methodology. If you attack the highest interest rate credit cards first, you can pay off your debt faster. Just make the minimum payment on all cards but the one with the highest interest rate. Attack the highest rate until the debt is gone, and then switch to the next highest rate. This is often called the “avalanche” method. You can calculate your savings using this calculator.
Reduce your interest rate. Every dollar you spend on interest is a dollar you could be using to pay down your debt faster. Reducing your interest rate can take years off debt repayment. One way to reduce your interest rate is with a balance transfer, which I will now explain.
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