Credit Card Bills Could Affect Your Retirement Goals: Go Beyond Monthly Minimum Payments Using AI

Major credit bureau Experian stated that American households have nearly four credit cards on average, which is 48 payments a year you need to take into account while planning your monthly budget. The report also mentioned that the average outstanding balance as of Q3 2020 stood at $5,315.

Credit cards often create an illusion of convenience, projecting that it is your money you are spending, and the lucrative offers on purchases make them even more alluring. With the possibilities that come with credit cards, some people seldom pay heed to the extremely high interest rates we are subjected to--a major reason why so many end up paying more than they owe over years of monthly minimum payments. As of October 2021, the average credit card interest hovered above 20 percent. Moreover, frequently missing credit card payments could attract late fees beyond $30.

Sadly, many people get stuck in the vicious cycle of making minimum possible credit card bill payments simply because they cannot afford to pay more than that. A recent survey from TheBalance revealed that 50 percent of Americans are left with only $250 of disposable income each month after paying for their regular spending and monthly bills.

The Ongoing Retirement Crisis

In these financial scenarios, the idea of saving for retirement in your early working years could become difficult, sometimes even impossible. Firstly, most Americans don't know how much they need to save for retirement. Secondly, their current lifestyles and ambitions take their focus away from those golden years in the future. As such, there's a mismatch in priorities, as well.

Some say saving ten times your annual salary by the age of 67 should be enough for retirement, whereas others feel that Social Security benefits will have their back. Medicare doesn't pay for long-term care more than a fixed duration, either, and the average Social Security benefit stood at only $1,555 per month in 2021. As per a CNBC report, the average 401(k) savings were merely $129,300 in 2021.

An MIT Agelab study estimated that a person may live 22 years in retirement, and the duration could possibly increase with technological advancements in medical sciences. That being said, the current retirement payouts and savings might compel people to work beyond their retirement age when they could be spending more time with friends and family.

Going back to credit cards, many Americans get them as soon as they are eligible for one, even before they get a job. Let's say individuals started contributing $5,315 (the average credit card balance) to 401(k)s annually at the age of 25 instead. Considering that their investments grow at a modest seven percent compounded annually, the 401(k) balance could accumulate over $734,000 by the time they reach 60 years of age.

Unfortunately, some Americans simply don't have the knowledge or tools to effectively repay their credit card debt even if they have a strong intent to do so. Many are fine in their comfort zones with making minimum possible payments without realizing how they could have built a fortune if they had just contributed the same amount to an investment vehicle instead. Ultimately, they miss out on the compounding interest on investments in their early working years, which could lead to a delayed retirement schedule.

How Artificial Intelligence Could Help Repay Debt Faster Than Usual

Even before the pandemic, the rapidly innovating world of technology has led to the creation of financial technology companies. COVID-19 simply accelerated the trend of people seeking financial knowledge and services from the comfort of their homes. With the advent of Artificial Intelligence (AI) and data science, financial experts and techies have come together to create financial online platforms designed to improve our financial lives.

We came across a smart mobile app called Tally that uses AI on a secure platform to scan your credit cards and understand your outstanding balances, due dates, and interest rates. They then come up with smart repayment plans and a projected debt-free date, given that you make the recommended monthly payments. You may add as many credit cards as you want into the system, as well, and Tally's proprietary tech will do the heavy-lifting to try and get you out of debt as early as possible.

Tally also offers a Tally+ membership that offers a line of credit with interest rates starting at 7.9 percent depending on your credit score. If you have a FICO credit score above 660, you may stand a good chance at securing a low-interest line of credit from Tally and start saving on interest from your next billing cycle.

When you sign up for free and secure a line of credit, Tally automatically transfers your credit card balances to their line of credit and pays them on your behalf. With a comparatively low interest rate, you will only pay one consolidated bill to Tally every month and save money on interest. Tally uses the Avalanche method by default to pay the maximum possible amount from your new line of credit towards high-interest credit cards while paying the minimum for low interest cards. This way, you can save money on interest and move towards being debt-free faster than usual.

In addition, Tally+ users will automatically be enrolled to the Late Fees Protection program where Tally pays on your behalf using your line of credit even if you pay Tally late. Since Tally offers a revolving line of credit, you may use it as many times as you want as long as you don't exhaust the limit. Bear in mind that it would be best to pay on time, stay current on your accounts, and provide accurate information in order to avail of the late fees protection incentive over the long term.

Tally is not a debt consolidation company that takes over your credit cards and gets in touch with your creditors. Another reason for using Tally is that you may choose to clear your credit card dues in one go and keep paying Tally on a monthly basis, possibly at a lower interest rate if you have a good credit score.

Tally Express Membership

Tally was founded by Jason Brown and Jasper Platz in 2015. They believed that high exorbitant interest rates on credit cards simply don't make sense. That's why the Tally Express membership was designed to allow a larger credit line, letting users earn discount points when they pay Tally on time. The discount points are then added to Tally's principal amount every month. Tally claims that paying on time for 12 consecutive months could even lower your effective annual interest rate on your Tally's line of credit up to four percent!

There's definitely a lot of scope to save money and repay debt faster with Tally if you are eligible for a line of credit that is lower than your existing credit card interest rates in the first place. The Tally Express membership usually comes with an annual fee that is paid from your credit line, as well, so you won't have to pay anything upfront.

Download the free Tally app on Android or iOS today.