Personal Finance Tips – Why You Should Get Rid of Your Credit Card Balances

There were times when credit card companies who charged annual fees only for the privilege of having a charge card. This means these companies made a profit even from those customers who paid their balance in full each month. Annual fees disappeared lately, but credit companies still make big money from different kinds of fees, such as late fees, over-limit fees, and transaction fees.

From 2003 to 2007 the industry's profits grew from $ 27 to $ 41 billion. Most revenue came from interest, but there is still an impressing 40 percent that comes from the different kinds of fees. Credit card companies profit even more from behavior that triggers a fee: if you make a payment late, the interest rate will grow, which is good news to the company.

There is no other way to avoid the interest and fees than paying off credit balances every month. There will be situations when this will be impossible: then you should pay as much as you can, and be careful with the new purchases until the balance is completely paid off.

You should be aware that some card companies are thinking about reintroducing fees for those customers who are paying off their balances every month. Therefore it is wise to read the fine print of your contract, making sure that the credit card company does not penalize those customers who are using their cards in a responsible manner.

Then you should be aware of the fact that credit card companies earn the most from minimum payments. If you have a $ 2000 credit card balance and you choose to pay it for 141/2 years, you will pay more than $ 1,500 in interest.

If you own more than one credit card and you decide to pay off all your balances, then it is good idea to start with the card that has the most expensive credit (meaning the highest rates). After you paid it off you can start paying off the card with the next highest rate, and so on until you are debt-free. You could also consider transferring balances from a higher interest card to a lower- or no-interest offer. However, most of these transactions carry a fee.

There are online calculators that can help you figure out how getting lower interest rate or making more than the minimum payment can affect your credit card debt. These tools enable you to calculate how long it will take you to pay off your credit card at the interest rate you have and minimum monthly payment.

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