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3 Ways to Avoid the Pitfalls of Credit Card Interest

Credit card debt is becoming a bigger problem. The latest numbers show the average American household carries more credit card debt than ever before.

According to credit reporting agency TransUnion, the average credit card debt in 2012 was over $5,000. This is only the actual debt number. Americans will pay more than this once the credit card interest is added to it.

The average credit card interest rate in 2013 was roughly 13%. Some cards have an even higher variable rate of 15%. Those numbers fluctuate throughout the year, which also means that they can affect the amount of debt you owe to a significant degree.

Carrying a high credit card debt can have a lot of negative effects. Bringing down your credit score is just the start. We’ve compiled 3 very important tips to avoiding those high credit card interest rates.

Pay Your Balance in Full

Think of a credit card interest rate as a luxury. You are paying a fee on your accumulated debt for the luxury of having more time to pay it back. If you pay it back in full, you can cut out those “luxury” charges. Not everyone is able to do this one, but if you are able to keep your charges within your income limit and pay off that credit card debt each month, you can avoid those credit card interest rates.

Even if you can’t pay off your credit card balance in full, put as much money as you can toward it. Don’t pay just the minimum balance. That number keeps you from falling out of favor with your credit card company but it won’t get you out of debt quickly.

Get in on a Promotional Period

If you have decent credit, you can often get a promotional rate on a new card. Most promotional rates of 0% interest is for six months to a year. Keep in mind though that those rates often carry an on-time clause. You only get to keep that 0% interest rate if you make all of your payments on time. If you slip on even make one payment, many credit cards will jack your interest rate up as high as 19%.

Transfer Balances

If you find that one card has too high of an interest rate, often times you can find a card that will offer you a lower or 0% interest rate if you transfer your balance to their card. These are sometimes tricky, and you should read the fine print on all offers like this. There may be hidden fees or penalties where you may not be aware. But if you have budgeted a plan to pay back your debt in a year and a card is offering a no-fee transfer with 0% interest for 12 months, it can be a helpful tool.

Sometimes credit card debt is unavoidable, but if you do need to use a credit card, think carefully. Try to pay your balance in full, stick to low interest cards and transferring your balance to a lower interest card can help keep your debt from getting out of control. And keep you from paying a lot of extra money in credit card interest.

Photo Credit: nami 1979

Tierna Unruh-Enos Tierna Unruh-Enos holds an MA in Journalism from Prescott College in Prescott, AZ. She is a an expert in careers, budgeting and saving money. A native of New Mexico, Tierna is a communications and marketing specialist in Albuquerque. She is also a mother, a freelance writer and lover of all things green chile (there may be a few exceptions!).
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