22/04/2024 11:43 PM

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Benefits of Paying Off Credit Card Debt Sooner Than Later

According to a report from Experian the average American household has $5,221 in credit card debt in 2022. If you are one of the many Americans struggling with credit card debt, you may wonder how to pay it down. For most people, it is better to pay off credit cards sooner than later. While there is no one-size-fits-all answer, financial experts typically recommend starting with the highest interest rate cards first. In this blog post, we will explain why this is generally the best strategy for paying down credit card debt.

Benefits of Paying Down High-Interest Rate Cards First

There are a few reasons why paying down high-interest rate cards first is generally the best strategy for paying off credit card debt.

Save Money On Interest Payments

First, by starting with the highest interest rate cards, you can save money on interest payments. For example, let’s say you have two credit cards with balances of $1,000 each. Card A has an interest rate of 18% while Card B has an interest rate of 12%. If you were to only make minimum payments on each card, it would take you 84 months to pay off Card A and 63 months to pay off Card B. However, if you were to focus your efforts on paying off Card A first, you could save yourself 21 months and over $600 in interest payments.

Get Out of Credit Card Debt Faster

Another reason why it makes sense to focus on high-interest rate cards first is that it helps you pay off your debt faster. By making larger payments on your high-interest rate cards each month, you can quickly get them paid off while still making minimum payments on your lower interest rate cards. Once your high-interest rate cards are paid off, you can then focus your attention (and money) on paying off your lower interest rate cards. This snowball effect can help you get out of debt quicker than if you were just making minimum payments on all of your cards.

Save Money for Retirement

The faster you pay off your credit cards – the sooner you can start putting your money toward long-term goals like retirement. If you want to avoid interest payments from interfering with your retirement goals, Symple Lending recommends paying down your credit card balances sooner rather than later. This way, the interest payments will compound over a shorter period.

Conclusion

If you are struggling with credit card debt, know that you are not alone—the average American household has nearly $6,000 in credit card debt. While there is no one-size-fits-all solution for paying down credit card debt, financial experts typically recommend starting with the highest interest rate cards first. By doing this, you can save money on interest payments and get out of debt quicker than if you were just making minimum payments on all of your cards.