Normally, the interest payments that lenders make to credit card holders aren’t a big deal. The interest’s usually just a nickel and dime cost of doing business that gets gobbled up by purchasing large items.
But an out-of-the-ordinary level of interest can brew something risky. And, if you have a frequent habit of paying extra interest on your card, that becomes financial trouble.
How so? Interest can become a cumbersome monthly payment that keeps you broke. Even worse, the higher the accumulated interest you have, the harder it is to reverse the situation.
Continue reading to learn more about how credit card interest can become a costly burden.
Danger of Late Fees
Credit card interest is often thought of as a relatively small and innocuous expense. However, the reality is that credit card interest can be very expensive, particularly if you carry a balance on your card from month to month.
In addition, if you are late making a payment, you will be charged a late fee, which can add even more to your costs.
Therefore, it is important to read about it, and be aware of the potential dangers of credit card interest and late fees, and to take steps to avoid them.
Danger of Defaulting
When you default on a credit card, the penalty can be severe. Not only will you be charged additional fees and interest, but your credit score will take a hit, which can make it difficult to borrow money in the future.
If you carry a balance from month to month, you’re likely paying hundreds, if not thousands, of dollars in interest each year. That money could be better used to pay down your debt or save for other goals. So while defaulting on a credit card can be costly, paying high interest rates is also a dangerous trap that can be difficult to escape.
Danger of Credit Card Debt
The danger of credit card debt is not the size of the debt, but also the interest that is charged on that debt.
Credit card companies make their money by charging interest on the money that you borrow from them. The interest rate on credit cards is usually much higher than the interest rate on a personal loan from a bank.
This means that the debt can get out of control, and you can end up paying much more than you borrowed.
Cost of Credit Card Interest Rates
When you carry a balance on your credit card, you’re charged interest. The average credit card interest rate is about 18%, but some cards charge as much as 30% or more.
It’s important to remember that credit card interest is a silent danger. If you’re carrying a balance on your credit card, make a plan to pay it off as quickly as possible. The sooner you do, the less you’ll pay in interest.
Recognize how Credit Cards Work!
You may be surprised to learn how much money you’re really paying in interest. So take a moment to understand how credit card interest works, and be sure to keep an eye on your credit card statements. With a little bit of knowledge, you can keep away from the traps that credit card companies set for the unwary.
Are you looking for more personal finance advice? And don’t know how to pay off a credit card? If so, then you’re in the right spot! Check out the other articles here on our blog to learn more today!