Have you ever wondered why your credit card balance is still high despite all your monthly payments? This can be very painful especially when you think that you are actually working on your debt. Instead of giving up on your debt repayment, carefully go through this article to learn why it is that way and what you can do.
Still Paying Only the Minimum
To quickly clear your debts, pay more than the minimum requirement. To do this, you may need to get additional sources of income such as working overtime, or taking a second job. This will help you raise more money to add to the minimum you always pay. If you do this monthly, your debt will drastically reduce or even finish.
Why your credit card balance is still high ; Your Payments Barely Cover Interest
Each time you borrow money from a financial institution, you will pay interest. Your monthly payments covers partly the amount of money borrowed and part of the interest. In a situation that more of your payment is for interest, your balance will still be high. But if you are paying more of the borrowed amount, your balance will reduce. To understand this, carefully review a recent copy of a billing statement to see how much of your last payment went to interest versus reducing your balance.
To solve this, increase your payment amount to lower your balance. Ensure that you make it clear that the extra payment goes to the principle you borrowed.
On the other hand, you can apply to lower your interest rate from your credit card issuer. Also, you can transfer all the balance to a low-interest rate credit card. But if it is a loan, the only way to get a lower interest rate is to refinance into another loan with a lower interest rate. You must have a good credit history to qualify for a lower rate. Refinancing is quite expensive, carefully weigh the pros and cons.
Fees Consume Your Payments
You probably have delinquencies which are keeping your balance from going down even though you’re making payments. The fees such as balance transfer, cash advance, late payment and annual fees can be high at times. However, some are avoidable. If you pay your monthly payments promptly, you will not pay late fees. Avoid cards with very high annual fees unless you are sure you are a big spender or run a business that will allow you enjoy all the benefits of the card. Some financial institutions waive annual fee for the first year. If your credit card issuer still charges a fee for using more than your credit limit, skip the fee by paying your balance below the limit and checking your available credit before spending.
Why your credit card balance is still high ; Still Creating Debt
As long as you keep making purchases with your credit card, you are still creating more debt. Stop using your credit card for purchases and do not take another loan. Use your debit card to make payments from your checking account.