By David
Times are tough and finances are stretched thinner than ever. Everyone is trying to find ways to reduce their bills to make their hard-earned money go just a little further. Obviously all the possible cost saving methods are too broad a topic for just one article, so today we’re going to focus in on your credit card bills; specifically, how to save money on your credit cards.
Get a loan or a low interest credit card
For most credit cards these days, the average interest rate is around 15%, whereas a low interest credit card is at about 10.4%, and loans are even lower than that. The advantage being that you can reduce your interest rates saving you money on your credit cards over the long run and, consolidating all your payments into one convenient payment.
Use part of your savings to pay off credit cards quickly
While it’s important to maintain a certain amount in your saving for emergencies, often times we find we have more there than we really need. The faster you can get those credit cards paid off the less you’ll end up paying and so it’s just good sense to use extra money that is at best gaining 3% to pay off a credit card with a 15% interest rate. Assuming identical rates, that’s a savings of 12%. Now, that is how to save money on your credit cards.
Pay off the smallest debt first to free up assets to tackle larger ones
We all know that the ultimate goal here is to get rid of or drastically reduce the debt. Assuming you have multiple credit cards with outstanding balances, you can pay the minimum on all but the smallest of them. There are a couple of great reasons to start with the card containing the smallest balance in order to help you save on your credit cards. First among these is the freeing of resources. For example let’s say you have three credit cards, one with $200 on it, one with $500 on it, and one with $1000 on it. And you can pay $200 a month on all of them. You pay the minimum on the two larger ($25 and $50 respectively). Then you throw all of what’s left at the $100 card paying it off completely. As you pay off each card you are freeing up the resources that previously would have been required to pay on that card and allowing you to focus your efforts.
The second benefit and arguably the more valuable, is the psychological relief that comes from successfully paying off a debt. Once you’ve had the first success it encourages you to continue and relieves some stress. Paying on the smallest debt first helps that moral boosting success come sooner and helps to keep you from developing an “I will never get it all paid off” attitude.
The above tips are just a few of the many available to you. Utilizing these strategies can help you save money on your credit cards and help you along your path to a more financially stable life despite the ever tighter economy.
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