Credit card debt is usually the single largest expense for individual with debt. Balances on credit cards generally attract that highest interest relative to other types of debt. Interest rates vary greatly and can be as low as 10% and as high as 59% APR.
For individual that always pay the balance of their credit card on or before it is due, avoid paying interest fees.
If you have outstanding balances on multiple credit cards and want to create an overview that can help you see what you owe and the fees you pay, try the following:
- Write down a list of all outstanding debt including the interest rates that apply.
- Rank them in order of interest rate in a high-low order. Having the debt with highest interest rate at the top of your list.
Now that you have created this overview, you can more easily see where your money goes to.
To reduce your debt faster, focus on paying down the balance on the credit card that has the highest interest rate as this will help you save interest fees.
The savings you achieve by following this approach should then be used to pay the balance on other credit cards, starting with the card with highest interest rate. Essentially you pay the next card on the list, starting from the top. The increased savings from fewer interest fees will eventually become a positive cycle that allows you to keep more of your own money over time!
If you are interesting in another to manage your debt, I recommend reading the article on Reducing debt using the snowball effect.