High-Interest Credit Cards: How to Avoid Paying More Than You Owe
High-interest credit cards are a type of credit card that charges a high annual percentage rate (APR) for carrying a balance. These cards are typically designed for people with less-than-perfect credit scores or those who do not pay off their balances in full every month.
How High-Interest Credit Cards Work
When you carry a balance on your high-interest credit card, you’ll have to pay interest on the unpaid portion of your balance each month. Credit card companies calculate the interest using your APR, which can range from 15% to 25% or higher.
For example, if you have a balance of $1,000 on a credit card with a 20% APR, you will owe $200 in interest charges over a year if you don’t pay it off. That’s on top of the $1,000 you already owe.
How to Avoid Paying More Than You Owe
To avoid paying more than you owe on your high-interest credit card, you should consider taking the following steps:
- Pay off your balances in full each month: One of the best ways to avoid paying interest charges is to pay off your balances in full each month. If you can’t do that, consider paying more than the minimum balance to reduce the amount of interest you’ll owe over time.
- Look for cards with lower interest rates: If you have a high-interest credit card, it may be worth looking for another card with a lower interest rate. This can save you money in the long run.
- Use balance transfer offers to save money: Some credit cards offer balance transfer deals that allow you to transfer your balance to a new card with a lower interest rate or a 0% APR for a promotional period. This can help you save money on interest charges.
- Avoid cash advances: Cash advances on credit cards usually come with higher interest rates and fees than regular purchases, so it’s best to avoid them if possible.
The Bottom Line
High-interest credit cards can be costly if you’re not careful. By paying off your balances in full each month, looking for cards with lower interest rates, and avoiding cash advances, you can save money and avoid paying more than you owe. It’s important to read the terms and conditions of your credit card carefully to understand the interest rates, fees, and other costs associated with your card.
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