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Special tactics to avoid paying high credit card interest

Save thousands of wasted dollars from high credit card interest by just following these 3 approaches.
April 11, 2020
Petko Plachkov
CEO and Co-Founder, Bright Money
Avi Patchava, Varun Modi, Amit Bendale, Avinash Ramakanth, Deepak Thakkar
Published on December 11, 2019

Credit cards are convenient but they come with a real cost! Every time you make a purchase on your cards, you are effectively paying more for what you bought in the form of interest owed to the bank.

Do you know how much interest you pay on your credit cards every year?

With the Bright app, you can login to see how much interest you have paid in lifetime on your cards and save the maximum amount based on your spending patterns with the help of Bright’s A.I. tools.

Before you let these figures set in and crush the soul, know that it is very possible to avoid paying interest or to find ways to pay significantly less. Here are the 3 approaches:

  1. Using a Balance Transfer or 0% APR Credit Card-

    What is it:

    Most credit card issuers give an introductory offer with 0% APR cards. These offers last for 6 months - 21 months.
    With Balance transfer, you can transfer your balance on a higher interest rate to a 0% APR card. This can temporarily help you get some time relaxations on payments for your cards.

    The Pros:

    Many balance transfer credit cards offer promotional 0% intro APR on transferred balances, giving you time to pay off any outstanding debts interest-free! The balance transfers comes with it’s own fee (usually 3- 5%) but gives you flexibility to pay your cards for a longer time at much lower interest rates.

    The Cons:

    It can take lots of time to get a new Balance transfer card. You still have to deal with the problem after the Balance transfer. The temporary solution cannot help you get out of debt faster.You cannot do a balance transfer between two cards of the same bank.

    How Bright helps:

    Bright users above a credit score of 720 are offered a line of credit that has a cheaper APR than all the cards owned by users. This line of credit is then used for debt consolidation and Bright pays the cards such that users pay minimum interest charges and get out of debt faster.
  2. Taking out a Personal loan-

    What is it:

    Debt consolidation is very effective if you get a personal loan with cheaper APRs than your credit cards. You can use the loan amount to pay your cards, and pay lower interest rates towards the loan. That said, it’s not as easy to get a personal loan as it is to get a credit card through your banks. Credit cards are unsecured lending offerings by banks while loans require formal documentation and are often secured against your bank accounts or collateral.

    The Pros:

    Cheaper APRs means cheaper interest fees. If you’re someone caught in a debt trap, taking a personal loan can help you pay debt faster, saving you some $s in interest fees.

    The Cons:

    Loans are often not unsecured and need a collateral. It takes time to get a loan approved and banks prefer giving lines of credit compared to loans. Taking a loan gets bound to have a better financial situation. The better you are with the finances, the more banks will favour you to provide the loan.

    How Bright helps:

    The Bright app offers a real-time loan to users with credit score above 720 at a cheaper APR than the credit cards. With powerful automation in hands, users don’t have to worry about card payments at all!

    Here’s how you can benefit by taking a personal loan with Bright - Should you consider a Loan to Pay Off Credit Cards?
  3. Starting a system to pay off Balances in Full-

    What is it:

    The best and safest way to avoid paying interest fees is to really ensure you pay your balance in full. This way you will avoid the cycle of debt, which is tough for anyone to escape. It needs budgeting and discipline to make timely payments. 

    Credit cards are the only form of loan which offer a grace period to avoid paying interest. Paying more than minimum due every month speeds up your credit payments and helps you increase your line of credit.

    The Pros:

    Credit card issuers often respect the discipline of paying off balances in full and often rewards the users by offering an additional line of credit to users. Credit score has a direct impact on timely payments and thus, paying off balances in full just makes it better.

     Paying off balances in full gets you free from interest charges.

    The Cons:

    There are no cons of paying off balances in full. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards instead of carrying cash or to take advantage of rewards like cash back or frequent flier miles. Just make sure those purchases fit within your monthly budget.

    Learn more about credit card terms here

    How Bright helps:

    Bright automates your credit card payments so you don’t have to worry about due dates and minimum payments!

    Bright is designed to do just this for you - working in the background (while you sleep!) to give you the discipline that will completely clear your balances. You can set your goals on Bright app for each month and get automatic payments to take care of your balances with no extra efforts!

The Bottom line...

Paying lower interest comes with lots of benefits too - You save money wasted on interest costs, disciplined payments boosts your creditworthiness, as well as your banks know you are a responsible person and they often increase your line of credit based on your credit history. 

Good credit history helps you when you look out for other loans, such as a mortgage, car loans, or personal loans.

Petko Plachkov
CEO and Co-Founder, Bright Money

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