Carrying a credit card balance over each month may not seem like a big deal, especially when roughly 49% of U.S. cardholders are in the same boat. But with interest rates at 24.84% as of July 2024, now is the best time to start paying off your loans each month.
Here’s why paying off your loans month to month is a good idea for your financial health:
1. Interest and Debt Accumulates
Even when interest rates aren’t at historic highs, interest is no joke. As your debt grows, so does your interest, meaning you’ll pay more than you spend over time. Plus, as your balance grows, it becomes even harder to pay it off.
2. Your Credit Score May Feel the Impact
When you have a lot of debt, it can be hard to make payments, but if you’re late or miss them altogether, your credit score will take a hit. Additionally, using more than 30% of your credit utilization can also impact your credit score. Your utilization ratio is the portion of your available credit, comprising 30% of your overall credit score.
Try a Debt Management Program
Whether you’ve done your due diligence and made your payments on time or are finding yourself unable to keep up, a certified credit counselor may be able to help. They will help you create a personalized budget, and they can enroll you in a debt management program. This allows them to work with your creditors to reduce your interest rates and consolidate your credit cards into one reduced monthly payment—so you can pay off your credit card debt in three to five years.
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