Preparing for a secure future involves a lot more than just saving diligently. Every decision you make along the way will impact your comfort and security in retirement, and that rule is certainly true for debt.
The average American consumer owes over $16,000 in credit card debt, at an average interest rate of 18.76 percent.* That means the average person is paying 1,292 dollars in credit card interest each year. That’s not counting the amount paid toward the principal balance; we’re talking about nearly 1,300 dollars of money wasted on interest, every year!
It’s easy to see why so many of us struggle with getting out of debt, and why many of us are carrying at least some of that debt into retirement. Just imagine if that 1,300 dollars could be put toward the balances of your cards instead. You could pay off your credit cards faster, and possibly even enter retirement free of those payments.
We have some good news for you. There actually is a way to obtain a “grace period” from high interest rates. You might have noticed that credit card companies frequently advertise 0 percent introductory rates for new cardholders. These introductory periods commonly last for a year or more, and are sometimes extended to balance transfers as well as new purchases.
By taking advantage of these offers, you could transfer balances and enjoy a period of time during which everything you pay is applied to the amount due.
However, not all deals are created equally. Before accepting one of these offers, inquire about balance transfer fees. Some cards offer a zero-fee policy, while others will charge you a percentage of the amount transferred.
Second, you will now be tasked with resisting the temptation to use your new card. That 0 percent introductory rate can look mighty tempting during impulse shopping sprees. You might address this risk by simply locking up the card at home, so that you never use it.
At the end of the introductory period, be aware that the interest rate might jump significantly. If you need to, transfer the balance to another card while you continue to pay down the balance.
These offers are not available to everyone, and won’t necessarily work for you. However, it is one option you should definitely consider as you investigate different ways to free yourself of debt.
*Data from the US Census Bureau and Federal Reserve