The leading credit bureau Experian said that American households have an average of almost four credit cards, which is 48 payments per year that you need to factor in when planning your monthly budget. The report also mentioned that the average outstanding balance for the third quarter of 2020 was $ 5,315.
Credit cards often create an illusion of convenience, projecting that it’s your money you’re spending, and the lucrative offers on purchases make them even more alluring. With the possibilities offered by credit cards, some people rarely pay attention to the extremely high interest rates we are subjected to – a major reason why so many people end up paying more than they owe over the years. minimum monthly payments. In October 2021, the average credit card interest rate was over 20%. Additionally, often missing credit card payments could result in late fees over $ 30.
Unfortunately, many people find themselves stuck in the vicious cycle of making minimum possible payments on credit card bills just because they can’t afford to pay more than that. A recent poll from TheBalance found that 50% of Americans end up with just $ 250 in disposable income each month after paying their regular expenses and monthly bills.
The ongoing pension crisis
In these financial scenarios, the idea of saving for retirement in your first few years of work could become difficult, if not impossible. First, most Americans don’t know how much to save for retirement. Second, their current lifestyles and ambitions distract from those golden years in the future. As such, there is also a mismatch in priorities.
Some say saving ten times your annual salary at 67 should be enough in retirement, while others think Social Security benefits will be saved. Medicare also doesn’t pay for long-term care more than a fixed duration, and the average Social Security benefit was only $ 1,555 per month in 2021. According to a CNBC report, the average 401 (k) savings were only $ 129,300 in 2021.
An MIT Agelab study estimated that a person can live 22 years in retirement, and the length could eventually increase with technological advancements in medical science. That being said, current retirement payments and savings could force people to work beyond retirement age when they could spend more time with friends and family.
Getting back to credit cards, many Americans get them as soon as they are eligible, before they even find a job. Let’s say individuals started contributing $ 5,315 (the average credit card balance) at 401 (k) per year by the age of 25. Since their investments grow at a modest seven percent compounded annually, the 401 (k) balance could accumulate over $ 734,000 by the time they reach age 60.
Unfortunately, some Americans simply don’t have the knowledge or tools to effectively pay off their credit card debt, even though they have every intention of doing so. Many are well in their comfort zone making minimum payments possible without realizing that they could have built a fortune if they had simply contributed the same amount to an investment vehicle instead. Ultimately, they miss out on compound interest on investments during their first few years on the job, which could lead to a delayed retirement schedule.
How artificial intelligence could help pay off debt faster than usual
Even before the pandemic, the rapidly innovating tech world led to the creation of fintech companies. COVID-19 has simply accelerated the tendency for people to seek financial knowledge and services from the comfort of their own homes. With the advent of artificial intelligence (AI) and data science, financial experts and technicians have come together to create online financial platforms designed to improve our financial lives.
We came across a smart mobile app called Tally that uses AI on a secure platform to analyze your credit cards and understand your outstanding balances, maturities, and interest rates. They then come up with smart repayment plans and a debt-free due date as you make the recommended monthly payments. You can also add as many credit cards to the system as you want, and Tally’s proprietary technology will do the heavy lifting in trying to get you out of debt as soon as possible.
Tally also offers a Tally + subscription which offers a line of credit with interest rates starting at 7.9% based on your credit score. If you have a FICO credit score over 660, you may have a good chance of securing a low interest line of credit from Tally and starting to save on interest for your next billing cycle.
When you sign up for free and get a line of credit, Tally automatically transfers your credit card balances to their line of credit and pays them on your behalf. With a relatively low interest rate, you’ll pay only one consolidated bill to Tally each month and save money on interest. Tally defaults to the Avalanche method to pay the maximum possible amount from your new line of credit to high interest credit cards while paying the minimum for low interest cards. This way, you can save money on interest and get out of debt faster than usual.
Additionally, Tally + users will automatically be enrolled in the Late Fee Protection Program where Tally pays on your behalf using your line of credit even if you pay Tally late. Because Tally offers a revolving line of credit, you can use it as many times as you want as long as you don’t run out of limit. Keep in mind that it would be best to pay on time, stay up to date with your accounts, and provide accurate information in order to benefit from late charge protection over the long term.
Tally is not a debt consolidation company that takes over your credit cards and contacts your creditors. Another reason to use Tally is that you can choose to erase your credit card dues all at once and continue paying Tally on a monthly basis, possibly at a lower interest rate if you have a good rating. credit.
Tally Express Membership
Tally was founded by Jason Brown and Jasper Platz in 2015. They thought sky-high credit card interest rates just didn’t make sense. That’s why Tally Express membership was designed to allow for a larger line of credit, allowing users to earn discount points when they pay Tally on time. The discount points are then added to the principal amount of Tally each month. Tally claims that paying on time for 12 consecutive months could even reduce your effective annual interest rate on your Tally line of credit by up to four percent!
There are certainly plenty of opportunities to save money and pay off debt faster with Tally if you qualify for a line of credit below the interest rates on your credit card. Tally Express membership usually comes with an annual fee which is also paid from your line of credit, so you won’t have to pay anything up front.