by Chris McCullough
Credit cards are a part of everyday life. Most of us have them and use them and we’ve all heard of, seen or experienced the dangers of overusing a credit card.
There are some simple steps we can do to cut down on our credit card debt and get ourselves back on the track to financial responsibility.
When we talk about credit cards and carrying credit card debt, there are some things we all know – it’s best not to carry any credit card debt because the interest rate will add up quickly, and we know there are some times we have to carry the debt due to other circumstances.
The simplest approach I can share is that if you carry multiple credit cards and have debt on all of them, focus on the card with the highest interest rate. Pay the minimum on the others and pay as much as you can afford on the card with the highest rate.
Once that card is paid off, move to the card with the next highest interest rate. This approach minimizes the amount of interest you pay, which means you’ll pay off the cards as quickly and cheaply as possible.
However, human nature normally leads us to pay off the card with the smallest balance first, regardless of the rate. Studies have shown it gives us a psychological boost to check one debt off our list and it always seems faster to pay off. Basically, our brain isn’t taking into account the principle of compound interest.
Keeping your focus on the highest-rate debt will get you to the finish line quicker and having paid much less interest.
Chris McCullough is Rabobank, N.A. Vice President and Branch Manager in Murrieta. Rabobank, N.A. has 119 retail branches in California, including Murrieta. www.RabobankAmerica.com.