Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

Credit Card Industry Set to Rake in an Extra $30 Billion. How to Avoid Paying Your Part.

April 14, 2016 at 12:00 AM

If you have unpaid credit card balances, your situation could soon progress from very expensive to ridiculously expensive.

The majority of credit cards charge interest rates that move up and down based on the level of benchmark indexes, and those benchmarks tend to move in lockstep with what happens to the Federal Funds rate controlled by the Federal Reserve. When the Fed raises its interest rate that means that credit card interest rates are headed higher. And in December the Fed raised its interest rate for the first time since 2006.

In a recent report, the Consumer Financial Protection Bureau noted that if the Fed’s projections for its target interest rate play out, the rise in interest costs for consumers who have credit card debt could be $30 billion over three years.

The bottom line: Paying high rates on credit card debt has always been a bad deal. But it’s likely to become even more costly as interest rates begin to rise. I hope that’s some extra motivation to get your credit card balances paid off.

And right now it’s an especially smart investment. Paying off the balance on a credit card that charges you 12% interest is the same as earning 12% on an investment. If you’ve been paying attention to how choppy the stock market has been lately, earning 12% is not likely.

Some tips for getting out of credit card debt:

  1. No shame, no blame. I want you to have a positive frame of mind about your goal to pay off your debt. Beating yourself up just depresses you. I want you to be full of optimism and determination. You can do this.
  2. Consider a balance transfer. If you have a strong FICO credit score of at least 740 or so you may be able to snag a balance transfer to a card that doesn’t charge any interest for a year to 18 months, and also doesn’t charge a fee for the transfer. Search online for “no fee balance transfers.”
  3. Ask for a lower rate. If a no-fee transfer doesn’t work for you, but you have a high FICO score, call up the credit card issuer and ask for your rate to be lowered. You might mention that you have other cards with better terms, so if this rate can’t be lowered you will shift all new purchases elsewhere. 
  4. Pay the minimum due on every credit card every month. Each and every month keep paying the exact dollar amount you paid this first month. Your card statement will show a smaller “new” minimum as your balance starts to shrink. Don’t fall for this. Keep paying the same minimum as you did this month and it will help you get out of debt much faster.
  5. Pay at least $50 more on the highest rate card. I want you to pay more than the minimum on the card that charges the highest interest rate. Fifty dollars is just my suggestion. I want you to push yourself to add as much as possible to the minimum payment due on the card with the highest interest rate.
  6. Keep repeating with your other cards. Once you have the balance paid off on your highest rate card, I want you to take all the money you were directing to that card each month and add it to the card that now has the highest interest rate on an unpaid balance. So for example, let’s say you were paying $340 a month on card 1 and $120 a month on the card with the second-highest rate. Once Card 1 is paid off you will be able to afford making payments of $460 on Card 2: the $120 you were already making, plus adding the $340 you no longer need to pay on Card 1.

Tag Cloud

holiday spendingprovider of financial supportface your financial fearburn out3% debt transferred FICO at least 720Communication Skills University of Illinoisget credit carddental savings plannon conventional routeknow before you oweteach importance of helping othersincentives for health care wellness screeningLovekids schedule paymentstelevision hostmarriage financial responsibilityallowance taskno interestGracealways use all paid time offhealthy retirement weightVeterinary School4 Must Have Documents loved ones dependent on incomepreexisting condition not coveredverify retirement plan with HR or plan sponsorearn allowancedo you need life insuranceCommencementfour steps to retirement savings no private loanGiftsbuy down credit cardJose Rodriguezschool pay more than minimumdon't defer interest payments10% donate to charitystudent loan repaymentone annual feeconfident of solutiondon't buy wantswrite new goaldo not pay allowance for good behaviorHDHP would you decline a bonusloan no longer than 36monthsbe good exampleprotect your familyIRA contribution gifted moneyraise insurance deductibleRevocable Trustnot enough life insuranceconsider roth 401(k)Citi Simplicity Card cost of capitalization calculatorovercome financial fearsresponsible with moneyhome insuranceSuze approvedFHA loan feesdebt freepaying for collegepay off debtSatisfyingRevocable Living Trustclosing costs 2% of loanMinor Children automate student loan payments740 credit scoreonly refinance if it paysreal estate mistakesnot gender specific is it necessarydangerous retirement planHigh FICO Score = Better Rateaffordabilitycut monthly cable billprofessional advisorgift not loan3 bucket approachemployer funding HSAraise your deductiblehome related tax break bonus no tax on withdrawlsdon't ignore open enrollmentRichlow down paymenttake actionbig results housing marketcredit unionvalentines daywomen long term caredental discount planSelfishshop online guaranteed level term policymultiple lenders20 year level term home loan credit score below 740 adult childrenUniversity of Floridapay 100% cashstudent loan repayment estimatordon't spend shorter payback periodCredit Card Interest Rate20% equityHolidayhome buying budgetinterest on student loansderailed planChanging Livestoo expensive schoolinsurance yearly reviewHoliday Shoppingfinancial argumentsautomatic withdraw to savings verify wellness screening and programsmortgageallowancecomparison shoppingborrow each year, capitalization is going to pile up credit reportlife insurance name trust as beneficiarybetter loan ratesDurable Power of Attorney for Health CareBill and Pennyinsurance mistakemortgage brokerEmergency SavingsVital Documentsbalance transfer Swap Older Annuities or Life Insurance learn good financial choicesretirement accountsOverspendingSandy Hook PromiseLTCi ASAPbuy homeNew York LifeOne Wallet At A Time15 year mortgageGiftcommissionspay down student loan debtmental healthstudent loan repayment planenjoy saving costly legal adjust allocations no retirement funds for down paymentbetter loan dealsMust Have Documentsyours, mine & ourspeace of mindgrandchild summer job IRA contributionproperty taxincrease retirement savingsprotect and provide for minor child Financial Systemno sneaking in feesno negativityMoney-Savingquick closingterm insuranceDeath BenefitSpendingCNBCno late fee BankCredit Card Rate Increasebreakdown projected monthly housing costmanage student loanspublic service career student loan repayment meet monthly credit utilization ratebad retirement planningrefinancerising home pricescompare monthly expensesincreased auto insurance premiumiffy incometeensraise deductiblesget health insuranceemergency fund savingscar buying mistakes401(k) Contributions15-year refinance dealCD'scnbc alarm clockinitial tax break Suze Orman Scholarshiplower overall drug costback-to-school budgetdon't blow tax refundLong Term Care shoppingRetirement Incomecredit managementMortgage Credit Availability IndexcommitPersonal Financedepreciating asset Post-Divorceretain separate credit cardstitle insuranceSuze changed my liferesponsibleengaged in financesunexpected expenseprotect dependent Goodbyepaid vacationLTCStudent Debt Crisisnegotiate points with bank or sellersave student loan debtHDHP's are good for youYoung Adult closing feesAARP Social security calculatorCredit scoreARM Cautionpowerfulrequired disclosureCollege of Veterinary MedicineFixed Rate Mortgageroth irabetter terms10 year repayment plan make saving a pleasureFICO Scoreanticipated salaryadvice for college graduatesrefundpoint cost offset by savingscollege studentcontribution dangerous money seasonheartacheMotherno life insurance financially irresponsibleNewtownapproved medical 100% tax-freecar leasingpay credit debt ASAPSuze Ormanaccelerate dental workemployer offered life insurancereplace permanent life insurance with termFinancial Cliffexercise reguarlysocial security not going brokelow credit scoreFinancial Gift Cliffage appropriate goalstaxessavingsFederal Stafford loanretirment savingsmoney vowsteens and moneyis it kind?pay interest while in schoolinterest capitalizationjuggle multiple financial goalsHigh Credit ScoreGay CouplesHoliday Seasonbe true to yourselfno fee transferEmployer Matched Contributioneliminate credit card debtdoctor no longer in networkno private loanshealthy teethhome ownership2015 financial roadmapLegal Guardian2016 adjust withholdingInflation Benefitraising mortgage rates grandparent IRA contribution women longer life spanfocus on needsalternative FICO scoreAmy LacyetBeautyEasy Life Insurance Long Term Care premiumshigh premiumssmall changes don't cover cosmetic dentistrygift grandchild IRA contributionlower interest rateForbesFree Debt Eliminatorhighest possible benefit20 to 25 times annual incomefederal student loan deferment Washingtonpurely financial standpointprescription tierescrowworkaholicoverspend on dining outHSA tax savingshealthy gumsvalue moneylow-cost index mutual fundcar loancreate new truthdream schoolpremiumrent vs buyphysical healthFinancial Educatorunsubsidized Stafford loan8 month safety netHDHP/HSAConventional loan PMIstandard deduction be kind to yourselfPay Off Debt Before Retirementfull retirement ageLong Term Care Insurance eight month living expense dental insurance 3 step financial road mapcharges on credit cardbill paying prioritiesincrease emergency savingsfiduciaryunder 18 financial gifthealthy aging children under 188 Rulesretirement planmortgage disclosureCombo Insurance Productspay high rate off firstdon't use allowance as bribeInterestno apologydebtsocial security2015 record year car salesdebit carddon't derail retirement savingsget the most out of social security Marlo Thomasgraduationuniversal college accessbudgetLifestylemobile appnear historic lowscut monthly cellular billorigination feesExhibitionlower premiumlower rateraising interest ratesFICO credit score credit card mortgagewomen outlive menbuying car 2016social security never insolventbuy home you can affordreal estate marketplanhealthy retirement blood pressureGay Rightsmortgage interest tax deductionaffordable premiumsecure creditreferrals TelepicturesBankruptcy!00% tuition paidFinancialspring summer costly insurance mistakefile asapFRAshort term goal max employee matchdear suzekeep a scheduleFederal Funds Ratehigh FICO scorespecial saving accounthigh down payment3 savings buckets buying a carteach your child good money habitsopen enrollment review Federal Reserveletter to suzefile taxes quicklyAccuQuote.compositivesuitablereduce monthly paymentoverspend on giftsCPI-Wlousy investmenthealthy youcouple financesemotional stakesInfluentialsdoctors in network20% down payment19 years cash flow problemwomen live longerignore 6 month grace period no waiting periodjanuary billsWall Streetlife insuranceworst financial mistakestretch out haircut appointmentsETF'sRetirement Savingsincrease retirement contribution rateAmericans don't use all paid vacation timeritual schedulemarriage inequality2017 TaxesForbes Top 10Most Influential Celebrities Listrepay student loansidentity fraudInvest for savings growthMoneythree year car loanlet them have 50% controlclosing disclosuresuccessspeak new goalFiscal ResponsibilityAARPcommunity collegeterm life insuranceAshley Springer30 year mortgage live below your meansrolloverStudent Debttax ID theftis it necessary?financial independenceprotect loved ones bad decisionsTeachFinancial Awarenessmax benefit coveredMoney Marketlowest cost fund option8 month emergency fundmax employer matched 401(k) contributionHow To Build Creditloan big picture gay marriage ban end Florida higher monthly paymentStudent LoanBaby BoomersAdequate Auto and Home InsuranceFundswives should be involved in retirementsame sex marriage band end FloridaPrime Rate Rise 2015Financial Awareness Video Festivalchildren's bookcalculate dependents annual income needsHDHP's are not badFederal PLUS loanidentity theft6 month waiting periodcompare provider pricingpush yourself to save more for retirementdeath benefit needs for familysecured cardfraudulent returnloan necessityget over life insurance phobiasame-sex marriagenew carlow mileage discountstandard ratesocial workPhyllis Shelton expert long-term caresave moneyForeclosurefamily save at least $100 monthlydon't do five year car loansavings pleasurebest loan deal overspend on nights outhome budget after tax costhome buying seasonemergency fund store credit cardsmonthly dental insurance premiumlong term goalschedule vacationSuze Orman's Money Warspay down car loansetup automatic savings withdrawbest interest of investorearn more on savingshome buying mistakespaid in fullRoth 401(k)become member Financial Adviceadd teenwaive home inspection bidPrime Rate Increasecommunity bankco-sign retirementEric Dodge public service loan forgiveness programmoney-aware childAlarm Clockrequire chore in exchange for allowanceCivil RightsSchool of Social Workannual cost of living adjustmentlower mortgage interestFinal Goodbyereduce interest rateLTC shoppingfocus on new truth switch to roth 401(k)ARMfinancial fearsage appropriate choreUS Tax CodePBS SpecialFinancial Power of Attorneyswitch to spouse coveragefinancial aidStock Investmentsstaycationhigher insurance deductibleSelectQuote.comSuze is my biggest mentor2016 adjust estimated taxmonthly benefit automatic paymentsummer job match income Suze Orman spouse Kathy Travislong term careultimate compounding giftFinancial Solutions For YouCOLA20% down payment avoid feesavoid burn out401Klong-term care premiumscontribute household expenses HeartCory BookerThe Suze Orman Showstudentpresident ObamaconfidentInfluential Celebrity50 over 50insurancegift up to 14,000traditional vs roth 401(k)New american Dream can you afford itMass MutualSave Us Moneyfinancial goal phrasedeath benefit 20 to 25 times annual incomeno splurge financing car high credit score discountis it true? high deductible health care planpermanent life insuranceleave a legacystrained relationshipborrowing plan sidelineddon't extend mortgage maintain standard of livingbest interest ratesonly offered while employed loan is giftAuto Savings back door Roth IRAtax refund fraudkid borrow firstfinancial concernpercentage men widowed 75-84Urbana-ChampaignWill40% toward financial goalstay positivelong-term care zero rate transfer dealsHDHP'sdon't charge a pennyreduce withholdingStaffords this year have a fixed 6.8% interest rateat worst still pay 75% benefitone credit carditemized deductionpercentage of women widowed 75-84college graduateWarner Bros Television GroupSandy Hook Elementary School

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel