A recent study has revealed that a significant number of credit card users in the UK don’t know how much interest they pay. As a result, the average cardholder has paid hundreds of pounds in interest that could’ve been saved. So, how can you ensure you aren’t paying more in credit card interest than you need to? Let’s find out.
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Are you paying more credit card interest than you need to?
The study, commissioned by Klarna UK and conducted by YouGov, revealed that credit cards are complex and have layers of varied charges and interest rates. These layers confuse many cardholders, leading to confusion when calculating how much a credit card purchase could cost with interest included.
This shows that many credit card users do not really understand what they’re charged, which further indicates they don’t know whether they’re on the cheapest deal. And, of course, this translates to paying more credit card interest than needed when it’s likely there;’s a better deal available.
How can you find the interest rate for your credit card?
To find your current interest rate, you’ll need to check your credit card statement and your debit orders. You can find this information on paper statements or by logging into your online account.
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How can you avoid paying high credit card interest?
Here are four ways you can make sure you don’t pay a penny more in interest than you need to on your credit card.
1. Understand how interest on credit cards works
It’s important to understand how credit card interest works first of all. This way, you’ll know different types of credit card interest and the factors that determine your eligibility for particular rates.
2. Learn how much purchases cost with interest included
This requires you to read and understand the terms of your specific credit card. If you feel that you’ll find this difficult, don’t be afraid to ask a financially savvy person for assistance. They’ll be able to show you how to make calculations, which will also help you choose the right card for your specific needs.
3. Compare different credit cards
Don’t just settle for one deal. It’s wise to compare different offers to find the most suitable deal for your needs. And remember, you can get more than one credit card to take advantage of different financial benefits. For example, a travel credit card may be ideal for spending when on holiday, while a 0% balance transfer credit card could help you avoid paying interest on your debt for up to 33 months.
The Motley Fool has created a list of top-rated credit cards to help you find the right one for your needs. Compare the cards to find deals that could help you keep more of your hard-earned money, especially now that inflation is rising.
4. Be wary of credit card introductory deals
It’s not uncommon to come across sweetened credit card deals, especially when times are hard. It’s crucial to take your time to read the fine print, make calculations, compare your current deal with the new deals and seek help if you’re in doubt.
Avoid making rushed decisions – a sweet deal can be good in the short term but bad in the long run. Additionally, just because a new deal is suitable for some borrowers, it doesn’t mean it’s ideal for your current situation.
