It’s a terrifying experience:
You’re living life as usual, happily going about your business and then BOOM: the credit card bill arrives. You open it and are shocked at what you find. Your balance has increased and it’s a lot more than you anticipated.
We’ve all experienced some version of this scenario and the emotional moments that follow. You ask yourself, how did my debt balloon out of control? How will I pay it? What did I miss? These are good questions that often have simple answers. Your credit card debt may have increased if you didn’t:
- Pay last month’s balance. We’ve talked about the value credit utilization. Paying your balance each month strengthens your credit score for future use and prevents interest from accruing. On the other hand, maintaining a balance is a great way to saddle yourself with crippling debt. The average credit card carries an interest rate between 18 and 25 percent, a huge sacrifice for your savings. Stop adding fuel to the fire by paying your balances in full every month. Why struggle with unnecessary interest?
- Keep track of all things “introductory.” Zero-interest credit cards are great until the introductory period expires. Creditors use zero interest to lure new customers in, allowing them to charge without worry for a limited time. Don’t be fooled by the marketing ploy: most introductory deals last 6 to 12 months, and then you’re left to deal with a new and costly interest rate. If you must charge, be sure to eliminate your balance before the interest rate kicks in. Your credit score will thank you.
- Regard the hidden fees. Many credit cards are riddled with annual fees, processing fees, payment protection transaction fees, international fees (the keyword here is “fees”). These add-ons can silently inflate your balance, leading to greater problems and depleted savings. Read the fine print before signing up for a new card and stick with one that doesn’t come with mandatory fees. Why pay to spend your own money?
- Curb your spending. Let’s be honest: Maybe it wasn’t a gimmick or thoughtlessness that led you into debt. Maybe you’re just bad with money. It’s a harsh but necessary reality to face if your debts are overwhelming. The ability to charge, charge, charge is tempting if you lack self-control, but the consequences will show themselves eventually. Find the motivation to change your spendthrift ways. Our blog is filled with helpful information and inspiration to get started. Allow credit to enhance your life rather than burden it. The time to change is now.