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Best Credit Card To Pay Off Debt – Credit cards are everywhere in our lives and are still relevant (at least in Singapore), even in the age of e-wallets and other forms of digital payments.
The speed of swiping (or tapping), the ease of payment and even the validity of “platinum” or “titanium” cards are among their attractions. In addition, shiny and sometimes colorful plastic pieces offer discounts, rewards or miles on purchases.
Best Credit Card To Pay Off Debt
But before you happily swipe, swipe, swipe (or tap, tap, tap), it’s important to know that when you use a credit card, you’re not actually paying out of pocket at the point of sale.
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Unlike a debit card, where fees are deducted directly from your bank account, the fees charged to your credit card are essentially short-term loans to the card issuer (such as a bank) that must be repaid. As with any other loan, the amount due is subject to interest.
Conversely, you won’t have to pay interest if you pay your card bills in full before the due date.
Credit card terminology is a bit confusing. Here’s a quick rundown of nine credit card terms that commonly confuse consumers.
Now that we understand the common terms used on our credit card statements, you may be wondering how we risk credit card debt and how we can avoid it.
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When you use a credit card, you are essentially borrowing money from the organization or bank that issued the card. These funds are available to you up to the limit set by the card issuer. Credit cards offer an interest-free period of about 20 to 25 days from the date you spend. This means that if you pay your bill on time (within the interest-free period) and in full, we won’t charge you anything.
On the other hand, a late payment results in high late payment charges, interest and administrative costs that can affect your cash flow for months or even years. Late payment fees are usually over S$100.
Although you can only pay the minimum amount, this is not recommended as interest will still be charged on any outstanding balance after the due date. They are usually between 26% p.a. and 28% p.a.
Credit card interest is calculated based on the interest rate. This means that interest is charged not only on outstanding transaction amounts, but also on any ongoing interest. Since it is calculated on a daily basis, the amount can add up before you know it. In other words, extra interest is accrued for every day you defer or repay the loan.
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Because credit card interest is accrued daily, the balance will continue to grow if you pay the minimum balance each month. In the example, you will reach your credit limit of $5,000 in one year.
When this happens, you won’t be able to spend on your credit card and you’ll have plenty of funds to pay. Your minimum payment will go from $50 to $150 per month (3% of $5,000) – it will take you 197 months (16.4 years!) to break even for one year. In total, your interest expense on the $5,000 would be $15,473.
Paying your credit card bills for more than 16 years can put a strain on your monthly finances, leaving you with less money available for other expenses.
If you have outstanding balances, there are 2 parts – the total outstanding balance and any remaining interest.
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It’s worth noting that when you only pay the minimum balance on your credit card, there’s always late payment interest. This means that if you only pay the minimum amount less the remaining interest charges, you don’t actually reduce your outstanding balance.
Not paying your credit card bills on time affects your credit score and your ability to get another loan or the amount you can get. This can come as a rude shock to young couples who try to apply for a mortgage only to find that the amount they qualify for is limited by their past repayment behaviour.
A warm fire is essential for life, as it is for cooking or heating in winter. But if the fire is uncontrolled and unchecked, it can easily burn down our homes.
Similarly, a credit card can bring us many benefits, but if left unchecked and unprotected, it can leave us heavily in debt or worse – bankrupt. As with the fire analogy, the key lies in how we manage and manage the use of these resources available to us. If you feel that a credit card is too much for you in your lifetime, you can also use other convenient payment cards.
How To Pay Off Credit Card Debt
Talk to a wealth planning manager today to review your financial situation and how you can better plan your finances.
Alternatively, you can check the planning and investment tab in DigiBank to check your financial status in real time. The best thing about it is that it’s hassle free – we automate your cash flow and provide money advice.
This article is for informational purposes only and should not be relied upon as financial advice. Before you decide to buy, sell or hold any investment or insurance product, you should consult a financial advisor about its suitability.
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Written by Holly D. Johnson Written by Holly D. JohnsonArrow Right Author Award-winning author Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance. In addition to writing for and CreditCards.com, Johnson continues to produce work for clients including CNN, Forbes Advisor, LendingTree, Time Magazine and others. Contact Holly Day. Johnson connected with Holly Day on Twitter. Johnson on LinkedIn LinkedIn Holi Day. Johnson
Edited by Liz Bingler Edited by Liz BinglerArrow Editor Right, Credit Cards Liz Bingler is an associate editor for CreditCards.com, where she focuses on news and product reviews. As an editor, her goal is to create content that helps people make informed financial decisions. Liz Binger
Reviewed by Claire Dickey Reviewed by Claire DickeyRight Editor, Credit Cards Claire Dickey is the product editor for CreditCards.com and To Her Credit. Prior to joining, Keller worked as a copywriter for brands in the telecommunications industry and a writer of marketing mix and content. Connect with Claire Dickey on LinkedIn Linkedin About our Claire Dickey Review Board
. The content of this page is accurate as of the date of publication. However, some of the listed offers may have expired. Terms apply to offers listed on this page. Any opinions, ratings, reviews or recommendations expressed in this article are solely the author’s and have not been reviewed, endorsed or approved by any card issuer.
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