half of credit card accounts in the U.S. carry balances
from month to month, according to a new report by the
American Bankers Association. With the average credit
card interest rate hovering near 16.5 percent, revolving
balances are a wildly expensive way to borrow money.
worry about the people carrying $10,000, $15,000,
$20,000 in credit card debt," said Greg McBride,
chief financial analyst at Bankrate.com. "They’re
making zero headway" paying off the balance if they’re
only making minimum payments, he said.
on a treadmill to nowhere financially."
American Bankers report found that 44 percent of card
accounts were revolving accounts vs. 29 percent that
were paid in full each month. Some 27 percent of
accounts were dormant.
vary for running up big balances. Some people use credit
cards to pay for necessities they can’t afford or they
simply overspend for their means. Others get hit with
major, unexpected expenses such as car repairs or
medical bills they can’t pay, so the debt ends up on
their credit cards.
people could buckle down and pay off their balance, if
only they realized how much money they were throwing
away on interest payments.
said some people carry balances because they mistakenly
believe that they have to owe money in order to get a
good credit rating.
hear that all the time," he said. "Let’s
dispel the myth right now: You can build a credit
history just fine by paying a card balance in full each
interest rates poised to head higher, revolving credit
card debt should become even more expensive in the
it means getting a second job or driving for Uber to get
that balance paid off, then do it," McBride said.
key to making a big dent in a big balance is making more
than the minimum monthly payment, which declines over
time as the balance declines, McBride said.
you’re just making the minimum, you’re paying less
and less as time goes on, and that drags out the payment
period for decades," he said.
with a revolving $5,000 balance at 16.5 percent interest
would owe a minimum payment of $119. Even if that person
sticks to paying $119 a month, it would take 64 months
to pay the balance off, and cost $2,512 in interest, he
the monthly payment to $200 would cut the payback period
to 31 months and cost $1,169 in interest.
should consider taking advantage of zero percent balance
transfer offers that let cardholders transfer a balance
to a card that doesn’t charge interest for an
introductory period lasting up to 21 months.
the downside, balance transfer cards typically charge a
3 percent to 5 percent balance transfer fee, although
there are some cards out there that waive that fee.
most card offers, the best terms will go to card holders
with good-to-excellent credit.
can hunt for the best balance transfer offers at various
websites such as Bankrate.com, Creditcards.com,
Nerdwallet.com, Lowcards.com and CreditKarma.com.
that zero percent rate as a tailwind toward debt
repayment," McBride said. "The goal should be
to get all of your card debt paid off before the low