5 Tips to Keep Your Credit Card Debt Under Control
People in credit card debt should evaluate the charges on each credit card and assess the interest rates. Taking stock or inventory of debt may be eye-opening, but it can bring to light the amount of debt incurred when balances are not paid in full each month. Once you know your debt load, you can begin shopping around for lower interest rates to transfer balances and save money on high-interest credit cards. Some credit card companies may negotiate lower rates to keep your business.
Tackle High-Rate Debt First
It is important to pay off at least the minimum payment each month on credit cards, but it helps to cut debt by tackling the high-rate credit cards more aggressively. You should make a plan to pay more on higher-rate interest credit cards to eliminate the balance altogether. The interest savings reduces the time it takes to pay off a credit card balance.
Make Automatic Payments
Most credit card companies let you set up automatic payments to deduct money from your paycheck or checking account. If you have credit card debt, you should determine how much you can allocate each month to pay it off and set up automatic payments to avoid the risk of late fees. Making extra payments when more funds are available can cut back on the amount of interest owed down the line.
Create a Budget
A personal budget lets you assess your income and your debt load. A budget outlines spending and can pinpoint unnecessary or wasteful habits. You may have to make lifestyle changes to cut back on spending so you have more funds to apply to credit card debt. Focus on high-balance and higher-interest credit cards, and put extra funds into these accounts to reduce debt.
Use Cash When Possible
It is tempting to use a credit card simply because it is available and eliminates the need to carry cash. However, it is easier to curb spending and follow a budget when you pay with cash. When using real currency, you avoid interest charges and reduce your overall monthly debt.
Credit cards come in handy when cash is low and you need to buy something. It is easy, though, for credit card debt to spiral out of control, quickly causing financial distress. The option to buy now and pay later is tempting, but when it comes time to pay the bill, you may find you can't pay the balance in full, and the debt and interest charges continue to rise. Learning how to curb spending, use credit cards responsibly and manage debt can positively impact your personal budget, cash allocation and credit score.
While credit cards are a convenient method of payment, the resulting debt that often sneaks up on you can derail financial plans. You should only use credit cards when you can pay balances in full. You can reduce your credit card debt by following a personal budget, paying more than the minimum required payment and negotiating lower interest rates.