According to NerdWallet, American household incomes have grown faster than the cost of living for the past decade. Despite that, consumer debt continues to rise. As of December 2019, the total revolving credit card debt in the nation is $443.96 billion. The average total owed per household is $6,849. The average amount of interest each household owes is about a sixth of that, at $1,162. Those who live in Michigan and who are tired of paying thousands of dollars in interest each year often wonder how they reduce their interest charges. NerdWallet provides some tips.
Per NerdWallet, the only real way for a consumer to eliminate interest is for him or her to pay off credit card debt entirely. For many people, paying off balances in full is simply not possible, especially if their total balances are on par with the national household balance. However, there are other ways for one to reduce interest costs significantly as he or she pays down debt.
One of the first things NerdWallet recommends consumers do is to identify cards and accounts with the highest interest rates and work to pay those down first. In the long run, taking this approach can save a person significantly more money than if he or she were to pay down the cards with the highest balances first.
When possible, consumers should also strive to make multiple payments each month. Credit card issuers assess interest based on the daily balance, not the balance on the card at the end of each month. Making multiple payments throughout the month can help to both reduce the average daily balance and interest charges along with it.
Individuals with good to excellent credit scores should also look into balance transfer cards. Many balance transfer cards come with 0% introductory rates that last between 12 and 18 months. Though these cards do charge a transfer fee, for many consumers, the fee is a small compromise for the significant cost savings on interest.
Finally, NerdWallet recommends against putting medical expenses on credit. Though for many people, unexpected medical expenses often do not fit into the budget, there are other ways to pay for medical care without going into debt. For instance, many doctors’ offices and hospitals are willing to work with patients by offering interest-free payment plans.