How to Get Out of Credit Card Debt
A recent survey revealed that nearly half of Americans are unaware of the true cost of credit card debt. According to LendingClub, over 47% of Americans do not know their current credit card annual percentage rate (APR) or its effective annual interest rate. This lack of knowledge can be financially detrimental, especially for those who carry a balance from month to month.
Understanding the Impact of APR
The APR on a credit card determines the cost of borrowing money and comes into play when the full balance is not paid off each month. With consumers collectively owing a record $1.14 trillion in credit card debt, the rise in annual interest rates due to Federal Reserve actions, including interest rate hikes, has further exacerbated the situation.
The Hidden Costs of Credit Card Debt
LendingClub CEO Scott Sanborn warns that failing to pay off credit card debt in full each month essentially means taking on a costly loan. Unfortunately, many Americans are unaware of the total amount of their credit card debt or struggle to locate their interest rates, which are often buried in the fine print at the bottom of statements.
The Importance of Financial Transparency
As interest rates climb to record highs, there is a growing risk of financial distress for consumers who accumulate debt without fully understanding the associated costs. LendingClub emphasizes the need for clearer communication from credit card companies to ensure consumers are informed about their financial obligations and the terms of their debt repayment strategies.
It is crucial for individuals to be aware of the terms and conditions of tools like 0% interest balance transfers and promotional rate cards, as failure to understand these can lead to unexpected rate increases after the promotional period ends.
By taking proactive steps to educate themselves about their credit card debt and practicing responsible financial habits, individuals can avoid falling into the trap of accumulating unsustainable debt and protect their long-term financial well-being.
About the Author
Megan Cerullo is a New York-based correspondent for CBS MoneyWatch, specializing in covering topics such as small business, the workplace, health care, consumer spending, and personal finance. With regular appearances on CBS News 24/7, she provides expert insights and analysis on current financial trends and news.
