498 - Why You Need to Understand Interest Rates

Tiny Leaps, Big Changes

Gregg Clunis

Mental Health, Health & Fitness

4.2 • 917 Ratings

🗓️ 24 February 2020

⏱️ 15 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

In this episode, we look at the APR on our credit cards and loans.

Quotes:

"More than 40% of Gen Z, around 30% of Millennials and Gen X, and almost 40% of Baby Boomers say they don’t know what the interest rate on their credit card is, according to a new survey by Stash, a micro-investing and banking app.

But it’s not like folks don’t need to know because they’re paying off their bill in full each month and not triggering any interest charges: Americans paid $113 billion in credit card interest last year, up 12% from 2017, and up a whopping 49% from five years ago when the national average was just $76.3 billion, according to MagnifyMoney, a financial product comparison website."

Takeaways:

1. A higher APR or Annual Percentage Rate leads to paying more overtime. This seems basic but is often underestimated.

2. If you aren't extremely careful, you can get into a situation where you are never able to get out of the debt (student loans).

3. Higher APR means less gets paid on the principle which means carrying a higher balance for longer and lowering your credit score.

Here's what to do:

Find your APR for every line of credit
Create a plan to repay those debts. Either based on APR or on balance (avalanche or snowball)

Resources:

https://money.com/millennials-love-to-pay-with-credit-cards-but-almost-30-of-them-cant-name-their-interest-rate/

Transcript

Click on a timestamp to play from that location

0:00.0	In this episode we talk about why you need to understand your interest rates.
0:05.6	Get excited because this is Tiny Leaps.
0:09.6	Veach! Big Change. Big Change.
0:20.0	Welcome to another episode of Tiny Leaps. Big Changes where I share simple strategies you can use to get more out of your life.
0:26.8	My name is Greg Klunis and in this episode we are looking at interest rates or really we're looking at a p r which is a little bit different
0:36.2	but basically the same thing right you can think of your interest rate or your a p r
0:40.8	your annual percentage rate as the amount of money that is being made off of the money you owe somebody.
0:48.0	So in the same way that if you have money in a 401k, the amount that you put in is earning money by what's called interest,
0:56.4	compounding interest, that same thing is happening to you negatively, right?
1:00.4	So you are paying more money by the interest that you are paying on whatever kind of loan or line of credit you have.
1:09.0	Now if I had to guess, I would say that most people listening to this episode, watching this episode,
1:15.9	probably understand that. I want to believe that. However, there is a very shocking statistic
1:22.4	I recently discovered that prompted this episode that makes me think maybe that's not the case and if that's not the case we have to fix that you feel if you saved an extra $1,500 this year without lifting a finger?
1:46.6	That's exactly what Empower can help you do.
1:49.7	It's an awesome mobile app that makes saving and managing your money the easiest thing that you'll do all day.
1:55.6	For starters, Empower has an automated savings feature.
1:59.2	You simply tell the app your weekly savings target and every day
2:03.0	Empower studies your income and spending and automatically
2:06.0	knows when to move the right amount of money into your savings account
2:10.0	where you're less likely to spend it. It's called
2:13.0	auto save. Just set it and forget it. If you want to save
2:16.0	1,500 more dollars this year, you've got to check out the Empower
	...

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