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Best 2020 Reviews closely monitors personal loan offers, debt reduction, and credit card consolidation offers sent through direct mail to consumers.
What should you do if you have a credit card balance? What should be your financial priorities with a credit card balance? Is it worth it to make any investment or take out another loan if you need credit card relief?
How to Deal with Credit Card Balance
You should pay it all as soon as possible according to the highly acclaimed investor Warren Buffet. And who else but Warren Buffet would know how to deal with money. He is after all, one of the most successful investors in the world.
Knowing what to do with your credit card balance is important because around two thirds of US adults carry some balance. According to one survey, almost 60% of US adults were burdened with credit card balance even before the coronavirus epidemic. Thus, a lot of US citizens could benefit from the advice of the investment maven; Warren Buffet.
Warren Buffet offered this advice during a Berkshire Hathaway annual shareholder meeting that was held online. He was responding to a question from a person who asked the investment mogul about what she should be doing with her newfound capital. The first thing Warren Buffet asked her was whether or not she was carrying a credit card balance. The woman replied that she indeed had a credit card balance that was incurring interest at 18% APR. Warren Buffet immediately replied that she should pay back the credit card balance as soon as possible.
The investment mogul also followed up his advice with an intriguing statement. He said that he is not aware of any safe investment that offers a return of 18% (in reference to the 18% credit card interest rate).
The sagacious advice from the Oracle from Omaha makes a lot of financial sense. You will stand to save more money by paying back your credit card balance ASAP. There is no legitimate investment that can cover the steep interest rate of credit cards. Thus, if you have credit card balance and gain some money, instead of investing it anywhere, you should first of all pay back your credit card balance.
Bottom Line: Discharging credit card debts saves more money than investing money anywhere.
Why You Must Pay Back Your Credit Card Balance Now
This is a very crucial moment that credit card holders should reflect upon very carefully. Election Day has passed and even the greatest investor has no answers to the enormous interest rate incurred by credit cards. There is no way to deal with it except by paying it back in its entirety.
The investment genius said that if he was incurring 18% interest on any debt then paying it in full would be his top priority. He added that doing so is better than any investment he knows of. And its not just better. Its ‘way better’ in the words of the investment wizard.
Thus, if you have a credit card balance, then the prospect of maintaining a lucrative investment portfolio and attaining financial independence is nothing more than a pipe dream.
Warren Buffet warned that you cannot be ‘better off’ with loans like these. And he is talking about just 18% APR which is very modest. Credit card interest rates can go up to an exorbitant 36%. Good luck paying back such debts in full.
Warren Buffets pragmatic words carry a lot of wisdom. Credit cards have very high interest rates meaning that heavy interest will soon pile up if you carry credit balance for any length of time. The only way to deal with a credit card balance is to pay it back in full without further ado. If you fail to do so, then interest will start accumulating at an astounding rate. Failure to repay credit card debt in time could make it impossible for you to pay back your dues in full.
How a Longstanding Credit Card Balance Can Harm You
A credit card balance increases rapidly due to the exorbitant interest rate. The balance may reach an amount where it is difficult to pay back the interest let alone the principal. You could end up in a situation where you are just paying back the heavy interest being incurred on your credit card balance. The interest being incurred can become so large that customers cannot keep up with the rapidly growing interest cost. This is how many fall into the credit card debt trap. The balance becomes so big that paying back the interest itself becomes impossible. In such a case, the amount will keep growing further beyond your reach even if you stop using your credit card.
Hence, it is crucial that people see credit cards for what they really are. These are double-edged swords that could end up doing far more harm than good. Many will argue that credit cards offer plenty of convenience and are in fact necessary for building up your credit rating. That’s true, but what is even more true is that the credit card balance must be kept under control if you want to thrive financially.
Paying Back Credit Card Balance
Thus, you must make it a habit of paying back any balance that you owe as soon as possible. Don’t give the APR any time to pile up interest cost. Avoid paying just the minimum balance. If you do that then you stay in debt for a very long time, interest high interest over this time frame and even fall into financial hot water.
The current coronavirus crisis has made it even harder to pay back credit card balances. If you fear that you cannot keep up with your payments, then you should reach out to your lenders.
In view of the current crisis, lenders are now offering forbearance programs to customers who cannot pay back on time. Remember that this is not debt forgiveness. You will have to pay back in full. But if your lender agrees, you could benefit from extended due dates, lower interest rates, late fee waivers and other privileges.
Concessions vary from one lender to another. Thus, if you are having problems, you should contact your lender to find out what concessions you are eligible for.