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Have Your Cake and Eat It Too – Save Big with Low Interest Credit Cards

By Eva Norlyk Smith, Ph.D.
May 22, 2009
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The easy access to credit afforded by credit cards for decades has allowed us to indulge our every whim and fancy at a moment’s notice. Far gone is that strange, old-fashioned custom called “saving,” a relic from the time of our grandparents and great grandparents. From baby boomers to Generation X and fast-moving Generation Now, we have little patience for such outdated pecuniary practices.

But financing the American Dream by simply charging it comes at a cost. Americans today owe almost a trillion dollars on their credit cards. According to the credit rating bureau Experian, U.S. households on average owe about $8,000 on their credit cards.

Credit card debt increased by more than 50 percent just in the first seven years of the new century, and almost tripled in the last fifteen years. Compare that to the 1930s, when debt was an unknown for most middle and working class families.

More than half of us don’t pay off our credit card balance in full each month. And while the average credit card interest hovers around 14%, that number hides the sobering fact that typical credit card APRs range from 6.99% to 19.99% and the people with the worst credit (and highest credit card debt) generally pay the higher rates.

How to Save 90% with Low Interest Credit Cards

Carrying credit card debt with high interest rates may not seem like a big deal when you pay your credit card bill each month. After all, if you just pay the minimum balance, payments generally are low enough to not put much strain on your finances, compared to the size of the debt carried.

However, take a moment to see what you’re really paying, and you’ll find that the numbers tell a very different tale. Let’s say that you owe $10,000 on your credit cards at 19.99% interest, and you pay the balance off at the minimum of 2% of the balance per month.

At that rate, it will take you more than 83 years to pay off your high interest credit card loan. In that time, you will pay $48,089.38 in interest, almost five times as much as you originally charged. In other words, you’re no longer living the American dream you’re shackled to a heap of debt.

Instead, take a look at the cost of low interest credit cards. On a low interest credit card with a rate of, say 8.99%, it would take 25 years to pay off a $10,000 balance, and you’d pay about $5,000 in interest. That’s almost 90% less interest than you’d pay with the 19.99% interest rate!

Quick Tip: Think that 25 years is still too long to be paying off debt? Keeping your balances on low interest credit cards isn’t the only way to save. How much you pay on your credit cards each month makes a big difference as well.

If instead of paying the minimum payment of 2% per month, you pay 4% of the balance owed each month, you can cut the pay-off time and interest paid by more than half. At that rate, it will take you about 11 ½ years to pay off the balance, and you’ll only pay $2,277.97 in interest.

To see how much you’d save with low interest credit cards, use this convenient calculator from




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