* This is a contributed article. The IBTimes news staff was not involved in the creation of this article and this content does not necessarily represent the views of IBTimes. When you buy through links on our site, we may earn an affiliate commission. Here are our T&C. For licensing please click here.
Prioritizing higher interest credit cards could help you repay your loan earlier while saving on interest payments.
Prioritizing higher interest credit cards could help you repay your loan earlier while saving on interest payments. Pexels

According to the latest report from the Federal Reserve Bank of New York's Center for Microeconomic Data, credit card balances continued their steady increase over the last two quarters in 2021 with a $17 billion jump in the third quarter alone. Furthermore, a State of Credit 2021 report from major credit bureau Experian stated that the average household credit card debt stood at $5,525.

Although the average credit card balance has followed a slight downward trend over the past year, many Americans still struggle to pay their bills on time. With the recent record-breaking job losses and poor financial lifestyle choices, some have fallen even deeper into debt or broke their retirement egg nest to keep their households from falling apart.

According to the latest report compiled by Center of Budget and Policy Priorities from September 15 to October 1, one in six renters still haven't caught up on rent, while one in four adults are still having difficulties covering household expenses. Moreover, a recent survey from TheBalance estimated that half of Americans don't have more than $250 left after paying their bills and monthly expenses.

While such a nationwide financial crisis could compel many to only pay their credit card's monthly minimum payments, these minimum payments usually come with exorbitant interest rates (above 20 percent). This could, in turn, result in you taking years before becoming debt-free again.

In fact, a calculator from Bankrate estimates that an average debt of $5,525 on a credit card with a 20 percent interest rate could take decades to pay off if the user is required to make monthly minimum payments at 2 percent of their outstanding balance. Over decades, you could pay over $24,902, where $19,377 of it would be just on interest. This is definitely worrying. If you want to explore other avenues of paying your debt faster while saving on high interest rates, read on.

Create a Smart Debt Repayment Plan with Artificial Intelligence

Technology has made a huge leap during the pandemic, even in the world of personal finance. When it comes to credit card repayment, an AI-powered lightweight mobile app called Tally could make a positive impact on your financial life from day one. Tally assures that they prioritize user information. They never store sensitive data and are protected by 256-bit encryption standards.

When you download their app and sign up for free and link your credit cards, their cutting-edge tech analyzes your credit card balances, interest rates, and payment history to come up with a smart debt repayment plan with a projected debt-free date. Although you can customize the debt repayment plan, Tally usually follows the Avalanche method of repaying your debt by default, where you pay the highest possible amounts towards credit cards with high interest rates and pay the monthly minimums for the rest.

Tally+ Membership Perks

If you get a Tally+ membership, you can look forward to saving substantial money on high interest rates. If you have a FICO credit score of 660 and above, Tally could offer a low interest line of credit starting from 7.9 percent, depending on your credit score. If you accept this low-interest credit line, Tally will transfer all your balances to your new line of credit and pay your credit card issuers every month on your behalf. In the process, you will pay Tally a consolidated bill every month with lower interest rates so you can start saving on interest from your next billing cycle. Unlike debt consolidation firms, Tally doesn't take over your credit cards or contact your creditors on your behalf.

That aside, the fintech firm ensures that you never have to pay expensive late payment fees again, thanks to their Late Fees Protection program. Through this program, Tally automatically pays on your behalf if you miss a monthly deadline so you won't have to pay late payment fees or risk negatively impacting your credit score. In order to avail of this feature, though, you will have to stay as current on your payments as possible. Once you reach your goal of being debt-free, you can also choose to keep Tally's low-interest line of credit for use whenever you need.

Start planning your journey to a debt-free future with Tally today.