How to reduce credit card interest and fees

How to reduce credit card interest and fees

Credit cards are one of the biggest sources of consumer debt, along with mortgages, student loans and auto loans. Credit cards are typically associated with high interest rates and steep annual fees, unlike other common forms of debt.

Americans paid $120 billion for credit card interest and fees each year between 2018 and 2020, according to the Consumer Financial Protection Bureau CFPB. That's about $1,000 per household, which is a hefty price to pay for the convenience of credit card spending.

Credit card debt is on the rise as consumers pay down credit card balances during the COVID-19 epidemic, and it is a concern that credit card debt is on the rise. Americans are increasingly reliant on credit cards, which has reached pre-pandemic levels, as outstanding credit debt has reached pre-pandemic levels.

What are some ways to save money on credit card interest and fees, including low-interest credit cards and personal loans. You can compare and contrast interest rates on a variety of debt consolidation products on Credible for free without any impact on your credit score.

How can I reduce credit card interest and fees?

Credit card interest can make it harder to pay other bills, such as a housing payment and groceries, eat into your household budget. The average household pays more than $80 per month in credit card interest and fees, which is about $1,000 annually, according to the CFPB.

There are ways to reduce the amount of interest you pay on your credit card. You can find more information about each strategy in the sections below.

You can pay off your credit card balance in full every month.

Carrying a balance across multiple credit card billing cycles is a quick way to rack up interest. Interest will accrue faster if you make the minimum payment on your credit card. It's possible to avoid paying interest if you pay off your credit card statement by the due date.

Getting out of credit card debt is easier said than done. There are a few strategies that can help you pay off credit card debt every month.

You can track your income and spending with a monthly budget. Then charge your credit card for the amount you know you can repay in any given month.

If you have a bad credit card debt, you're in for a lot of cash. If you get a bonus through work or a hefty tax refund, be sure to put that money aside for debt repayment.

This can help you avoid taking out credit card debt to pay for unexpected expenses like car repairs or unexpected medical bills.

You can start building up your emergency fund by setting up Direct Deposit from your paycheck directly into a high-yield savings account that grows over time with interest. You can compare high-yield savings account rates across multiple banks at once at Credible.

Unlike a credit card with less interest and no annual fee, you can switch to a credit card with lower interest.

In Q 4 of 2021, the average credit card interest rate was 16.44%, according to the Federal Reserve. Credit card issuers can change their interest rates depending on several factors, and they can vary from one credit card issuer to another. Some financial institutions offer low-interest credit cards that offer more competitive rates than certain types of rewards credit cards.

Besides interest charges, many credit card issuers charge a steep annual fee between $95 and $495. Some annual fees may be worthwhile for consumers who use credit card rewards to redeem travel credits, but the savings don't always offset the annual fee.

There are plenty of credit cards that don't come with an annual fee. If you're paying a credit card annual fee for an account that you don't use, consider switching to a card with no annual fee. You can browse all types of credit cards for free on Credible's online financial marketplace.

Personal loans are lump-sum, fixed-rate loans that are commonly used to consolidate high-interest credit card debt. Debt consolidation loans offer lower interest rates than credit cards and are repaid in predictable monthly payments over a set period of time.

Paying off credit card debt with a personal loan can help you save hundreds or thousands of dollars over time. A recent Credible analysis found that borrowers with good credit can save up to $2,400 in interest charges by paying off credit card debt with a personal loan.

Personal loan rates are currently at record lows, meaning you may be able to save more money while paying off your debt, according to Fed data. You can see personal loan rates tailored to you, and use a personal loan calculator to estimate your monthly payment and potential interest savings when you visit Credible.

You can email The Credible Money Expert at Money Expert at Money and ask a question that is not answered in our Money Expert column.