Some may have noticed that credit card interest rates have not only stayed stable, but many have actually increased, of late. Interest rates of 20% annually on unpaid credit card balances seems to be the norm, an extreme divergence from where bond yields and lending rates generally are right now.
Accordingly, those with outstanding credit card balances ought to deal with these first, when tackling one’s debt load. Credit card balances are the worst type of debt to have in general, and ought to be avoided at any cost. With most lines of credit and mortgages offered in the 3% (or even lower) range right now, trading a credit card balance for a higher balance on one’s line of credit is a very good move.
Discretionary spending is great, and we all want to have the latest gadgets and gizmos. If the holiday spending spree was a little larger than in previous years, cutting down on one’s expenses and focusing on paying down these credit card balances ought to be the priority. It’s impossible to get ahead if one is earning 7% a year on a portfolio and paying 18%-20% on one’s outstanding credit card balances.
Individuals ought to prioritize their personal finance needs. Credit card repayments (in full, every month) should be the goal every individual has. If getting behind becomes a common theme, lowering one’s limit or spending cash instead for a period of time until one gets back on track is a good idea. Credit card debt has a way of running away from people, so staying focused on the long-term goals while managing one’s short-term spending is important.
Invest wisely, my friends.
