How to Get Out of Credit Card Debt
A new survey reveals that nearly half of Americans are unaware of how much credit card debt could cost them. According to financial services company LendingClub, over 47% of Americans do not know their current credit card annual percentage rate (APR) or its effective annual interest rate. This lack of knowledge can be financially detrimental, especially for those who carry a balance on their credit cards each month.
The Impact of Credit Card APR
The APR on a credit card determines the cost of borrowing money and comes into play when cardholders do not pay off their balance in full each month. With consumers currently owing a record $1.14 trillion in credit card debt, the stakes are high. Furthermore, annual interest rates have surged due to actions by the Federal Reserve, including interest rate hikes that have pushed rates to a 23-year high.
The Hidden Truth About Credit Card Debt
LendingClub’s survey also uncovered that many Americans are unaware of the total amount of their credit card debt or where to find information about their interest rates. This lack of awareness exemplifies a troubling trend where individuals struggle to easily locate and track their APR. Moreover, the current average annual interest rate of 22.76% is a record high, posing a significant risk to consumers who spend without a full understanding of the debt they are accumulating.
The Call for Clearer Communication
LendingClub emphasizes the need for credit card companies to be more transparent with consumers. The complexities of credit card terms and conditions, including promotional rates and balance transfers, often catch individuals off guard. Many consumers are unaware that promotional rates will expire, leading to increased prices after the initial period. As such, there is a pressing need for clearer communication from lenders to ensure that consumers are well-informed about the financial products they are utilizing.
By educating themselves about credit card terms and actively monitoring their debt, individuals can take steps to avoid falling into the pitfalls of high-interest credit card debt. Understanding the costs associated with credit card borrowing is essential for maintaining financial stability and avoiding potential financial distress in the future.
