If you are worried about your retirement because of your multiple debts, you might want to consider credit card consolidation. According to reports, people are more unlikely to save for their retirement when they have personal debt. In fact, 3 out of 4 Americans said that they are not contributing to a retirement plan because they want to pay off their debts first.
The truth is, there are times when you can really save more if you pay off debts first – especially if it involves high-interest credit card debts. If you compare the amount that you will save from the interest on your debt and compare it to what you will gain from your savings account, it makes more sense to prioritize your debts.
However, if you factor in the compound interest that retirement funds earn, it makes more sense to start saving for retirement as soon as possible.
But how can you do it when you are struggling to keep up with your high-interest debts?
Credit card consolidation can help you build your retirement funds
The best way to save your retirement from the effects of debt is to use credit card consolidation. We want to focus on credit cards because it is this type of debt that has the highest interest rate. To make sure that your debts will not compromise your future retirement, you need to enroll in a debt consolidation program now. You need to focus on the debt that is affecting your finances the most. That means you need to concentrate on your credit card debts.
Here are the reasons why it can save your retirement.
Helps you lower your monthly payments
Once you take on debt consolidation, it can help you lower down your monthly payments. This can be an immense help when you are trying to be aggressive in saving up for your retirement. The thing about saving for retirement is you do not have to save a lot immediately. You can save even a small amount – as long as it is consistent. This is the best way for you to take advantage of the compound interest. When there is compound interest, your retirement fund grows significantly. So the earlier you start, the more you can gain from this interest.
But how can you do that if your limited finances are bound by your credit card debt payments? You need credit card consolidation because it can help lower your monthly payments. You can choose a loan that has a longer payment period. When your debt is spread over a longer period, it can lower the monthly payment requirement.
Gives you the chance to focus on increasing your income
Credit card consolidation can help save your retirement because you get to focus on one payment. One of the things that you want to avoid in retirement is bringing in a lot of credit card debt payments. It can be confusing to keep track. If you consolidate, you can minimize the effort involved in keeping up with all the monthly payments. Not only that, simplifying your debt payments mean you get rid of the stress as well. You do not have to worry about late payment fees and penalties because it is easier to make sure you pay your dues every month.
With minimal effort and less stress, you have more energy and concentration to come up with ways to increase your income. You can spend more time at work or you can even come up with a side gig. The extra money that you earn can be added to your retirement fund.
Gets rid of high-interest credit cards
Finally, credit card consolidation will help remove your high-interest cards. When the interest rate is high, you spend more on the debt. But since consolidating it involves a new credit account, you have the chance to get an account with a low-interest rate. This will save you a lot of money because most of your payments will go to the principal debt. If you get a 0% balance transfer card, you can save even more on the debt. If you pay off the whole balance before the introductory period starts, you can end up not paying anything on the interest! That will result in really huge savings – especially if your credit card interest was really high.
Tips to keep credit cards from ruining your retirement
As you can see, getting rid of your credit card debt can really help you advance in saving for your retirement fund. That does not mean you should stop using your credit cards. You still need it to help you build your credit score.
What you need to do is to be smart with your credit card use. Here are a couple of tips that you can use to make this possible.
Pay your balance in full
One of the costly mistakes of a credit card holder is their inability to pay their balance in full when the billing statement arrives. According to a survey, almost 6 out of 10 credit card holders do not pay their rewards cards in full. If you do not pay your balance, what is left will be carried over to the next billing cycle and a finance charge will be added to it. If the card has a high interest rate, that charge will be high as well. By paying the balance in full, you are avoiding the effects of the high-interest rate of your card.
Get rid of high-interest cards
Having multiple credit cards is not really helpful when it comes to increasing your credit score. It only poses a threat to your financial situation. Having only 2 credit cards should be enough – as long as it is something that you use all the time. So if you have high-interest credit cards that you do not use all the time, you might want to get rid of them. Pay off the balance and close them. This will affect your credit score temporarily but if you continue to display good credit behavior, this can go up once more.
Follow these tips even as you continue with credit card consolidation and you should be able to save your retirement before it is too late.