It’s Financial Literacy Month. Here’s All You Need to Know

April is Financial Literacy Month, and it always begins with a sad fact.

Each year, a wonderful organization called the National Financial Educators Council gives thousands of Americans a test. It’s called the National Financial Literacy Test, and it quizzes volunteers from every state, starting at the tender age of 15.

Basically, the test determines how much you know about credit scores, budgeting, and (of course) debt. Unfortunately, our nation never gets an A-plus. In fact, this year, the average number of correct answers totaled just 67.4%.

“Nationwide testing demonstrates that the average person lacks the basic financial knowledge he or she needs to make qualified financial decisions,” said Vince Shorb, the CEO of the National Financial Educators Council.

While that’s true, I’m a wallet-half-full kind of guy. I believe if we can instill three concepts into most Americans this month, we can save them a lot of money – and therefore stress and anxiety, too.

1. Credit cards are the worst kind of debt

If you have a mortgage, that’s (hopefully) the most amount of money you owe. If you rent but have a car loan, then that’s likely the most you owe. But credit cards will cost you more based on every dollar you spend.

The reason is simple. The interest you pay on a mortgage these days is somewhere between 6-7%. The average car loan charges you 6-10%. But credit cards are averaging 21-24%. Yours might be even higher.

Worse still, almost all mortgages and car loans are what’s known as “fixed rate.” That means the interest rate you pay never changes. But credit cards can change those rates. They do that several times a year. So you could be paying even more a few months from now.

 Think of it like this: For $5 you carry, you’re giving away at least $1. If you can pay down – or better yet, pay off – your credit card balances, you’ll have hundreds of extra dollars every month.

2. Don’t get a loan to pay off debt

How do most Americans deal with debt? They take out new loans to pay off old loans! They’re called debt consolidation loans, and they can work in very specific circumstances.

The concept is simple: If you’re paying 24% interest on a credit card, just get a personal loan at 8%. Then use it to pay off the credit card. Voila, you’ve saved 16% interest!

There are two problems.

First, if you have a lot of credit card debt, you’re probably struggling in other areas of your finances. That could mean a low credit score, which means you won’t get a low-interest consolidation loan. And that’s the whole point, right?

Second, after a decade leading Debt.com, I’ve found that many people just get into more trouble with a consolidation loan. If they’re using credit cards to make ends meet, then a loan just delays your inevitable day of debt reckoning.

Consolidation loans are best when you’ve run up your credit card balances because of a specific incident, whether it’s an illness, accident, or even a natural disaster. If the bones of your budget are solid, then a loan can bridge the gap until you can make up the difference. Otherwise, see number three below…

3. You don’t have to deal with debt by yourself

The worst way to get out of debt is going it alone. Debt can be confusing and complicated. With a professional debt counselor at your side, it’s not only easier, it’s stress-free.

It’s called credit counseling, and it’s been around for decades. It’s monitored by the government, it’s totally free, and it’s helped millions of people save millions of dollars. Yet it never gets the attention it deserves, because credit counselors are hired by nonprofit agencies that don’t spend big bucks on lavish ad campaigns.

Credit counseling is the first step to finding a customized solution to your debt – especially that costly credit card debt.

If you do nothing this month, call a credit counselor for a free debt analysis. Debt.com can introduce you to one. Make April the month you not only learn about your finances, but you master them, too.