Credit card assistance

[sonobia]

Hi, I never really paid attention to my credit card statements but just realized Bank of America was charging my interest on my balance of $9,000 (I was charged $215)…

A friend told me that some banks actually give you money back (rewards, interest) for holding your money in their bank.

I’m new to all of this and I’m so lost. As I banking wrong? Should I switch to Chase, PNC, Citibank, Wells Fargo or just stay with Bank of America. So lost, please help, I don’t want to pay these high fees and I want to start saving!

 

[jenny404]

@sonobia Having money in the bank isn't going to save BofA from charging you $215 a month.

 

[kimrossie]

@sonobia Avoid the interest by paying the previous month’s credit card balance in full.

Your friend is probably referring to a high yield savings account and yes, they usually do pay more in interest.

 

[trustinghimeverymoment]

@sonobia You are banking wrong. You borrowed 9,000 from credit card company and they charge you every month until you pay them back. If you want them to pay you money then you need to pay back the credit card and start putting money in a savings account.

 

[resjudicata]

@sonobia Some credit cards offer rewards when you spend money with them. I have a credit card that offers 2% cash back on every purchase I make.

Some banks offer high yield savings accounts (HYSA) where you can put your money and it will accrue interest over time. If you have a 5% interest rate on your HYSA and you leave $10,000 in the account, for example, after a year you'll have $10,500 in the account.

If you have a credit card that you currently owe $9,000 on, you're not going to get paid for carrying that balance.

It looks like you were charged $215 on your $9,000 credit card balance. This translates to a 28% or so annual interest rate, which accrues monthly against your balance.

It would be best to pay that card off ASAP.

 

[sonobia]

@resjudicata So, if I pay everything over on my credit card and start saving in my checking account, is there a way I can accrue interest for having a checking account and keeping my money there? If so, which bank is the best for the best rewards?

 

[jpp]

@sonobia You're going to need to walk through this slowly. If you don't know how or what questions to ask, you're going to have a tough time with your finances in general.

https://playmoneysmart.fdic.gov/games

 

[mic747eal]

@sonobia Pay off the balance. All credit card companies change interest for balance you’re carrying over. (There are some 0% interest cards for a time, but eventually they’ll charge too). The rates are usually very high like 25%.

So yes credit cards can give points and cash back, but that’s like 2% and it’s for purchases. It’s not worth carrying a balance.

In the same manner, there are banks that offer High Yield Savings Accounts for storing your cash - online banks are really great for this and tend to be competitive. But that’s still like 4.2 - 5.5%. Keeping your cash in a savings account while you have CC debt of 20+% means you’re still losing.

• pay off your credit card
• once paid off, keep it paid off every month. You can use it, just use it for things you would be paying for anyway, like utilities. Treat your credit card like it’s a debit card or checking account.
• keep your emergency money in a high yield savings account.

Once you do that, then you’ll be ready to upgrade your financial knowledge and enter the world of things like brokerage accounts. But first you gotta get stable.

 

[sonobia]

@mic747eal So, if I pay everything over on my credit card and start saving in my checking account, is there a way I can accrue interest for having a checking account and keeping my money there? If so, which bank is the best for the best rewards?

 

[mic747eal]

@sonobia Checking accounts don’t give high interest rates. It’s not what they’re meant for. High Yield Savings Accounts do. Many banks offer both checking and savings (though not all banks offer high yield savings. A lot of regional banks give crappy rates like 0.05%)

For example I keep about $800-$1000 in my checking account and the rest is in HY Savings or in retirement, or brokerage accounts. We pay our bills via CC and then we transfer money from our HYSA to our checking to pay the CCs. The checking and savings are at the same bank so the transfer is very easy and same-day.

As far as the best, that changes all the time as banks change rates , and there are other factors like physical vs online, how many transfers from savings to checking are allowed per month, hidden fees, etc…. I’m happy with Ally, but they don’t have the best savings rate (4.25% right now). A lot of people like Sofi. Or Capital One 360. But there might be even better out there.

 

[heartofholiness]

@sonobia I had a checking account that gave interest but it was a tiny amount and, I needed a minimum balance of like 25 grand. I made like 16 cents a month. Checking accounts aren’t the place to earn interest.

 

[barnabas1954]

@sonobia You probably misunderstood what was said by your friend.

Pay off the credit card balance if you have the money.

Or move the balance to a zero percent interest rate credit card and pay off the balance during the months you have no interest expense.

I wish you well on your journey. Thanks.

 

[yendor911]

@sonobia Credit cards charge huge interest rates. It's usually only the foolish or the desperate who carry a balance month-to-month. You should work on paying that off as fast as possible, and then never spend more each month than you can pay off in full at the next month's due date.

To earn interest, you should transfer extra money from your checking account to a "high yield savings account" (HYSA) such as Lending Club or Marcus. My preference is actually to just hold it in a brokerage account at Vanguard where it will be automatically placed in their "money market fund" that yields a bit higher than a HYSA but is still extremely safe. In any case, you will be credited with interest monthly.

However, the amount you can earn in interest (about 4-5% per year) is never going to be close to credit card interest rates (20-30% per year), so it's always better to pay off the credit card first before trying to earn interest in a savings account.

 

[ecotime47]

@sonobia You have one financial goal above, miles and miles above, all others: get your credit card debt down to zero; pay the entire balance on your credit card as soon as you possibly can.

Credit card debt charges gargantuan interest rates that dwarf literally everything else, to the point that you should probably completely stop saving for retirement until the credit debt is fixed, even if you have a company-matched 401K.

Check the interest rate on your credit card. Multiply that percentage by your outstanding balance. That's the money you're wasting every single month.

Paying off your credit card will let you keep that money every month rather than burning it as you currently do.

Do that ASAP. High-Yield Savings Accounts and even retirement should take a back-seat to your credit-card debt; nothing snowballs faster or harder than credit card debt, which is why it's widely-known to cripple people financially, often bankrupting them.

Eliminate your credit card debt above everything else.