Manage Credit Card Debit, Don’t Let It Manage You
By Shannon M. Medisky
The ideal may be to pay off credit card balances each month, but numbers don’t lie. A large number of Americans carry a credit card balance each month, and a large number of those who do often feel managed by their debt instead of the other way around. Even if household economics don’t allow for paying off debt entirely, there are still ways to take control instead of feeling overwhelmed and out of control.
Know what you owe. As difficult as it might be to own up to the reality of what you owe, it’s important to do so. Keep a written record of your balances as well as the rate of interest and periodically call and confirm this with your creditor. Letting erroneous charges and fluctuate interest rates sneak up on you will only defeat your efforts to finally rid yourself of the debt. Ignorance is not bliss, it’s expensive.
Consider signing up for automatic (electronic) bill pay. Whether it’s set up through your bank or the creditor, you’ll never be late on a payment again, saving you late fees and potential increases in your interest rate. Additionally, you’ll quickly create a track record of on-time payments which will in turn be reported to the credit bureaus resulting in a higher credit score for yourself. After a few months, give the creditor a call and ask for an account review and submit a request for a lower interest rate. If your diligence is rewarded and the request is approved, keep your automatic payment amount as scheduled even if your minimum due goes down as a result. You’ll see your principal due shrink faster without even feeling the financial pinch!
Never pay the minimum unless you want to get nowhere. Creditors aren’t stupid. They want to ensure you owe them money over the long haul in order to maximize their profits. As a result, they’ll only require that you pay a minimum amount each month which usually only totals the interest accrued and a very small amount of the principal due, if any at all. Paying only the minimum they require is like agreeing to simply give them money for no good reason. Instead, ensure you keep more of your money and start paying more than the minimum due. Even if you can only afford to pay a small amount more, do so. Every little bit counts.
Select a success strategy and stick with it. There are two great strategies for paying off credit card debt: 1) Pay off the card that charges the highest interest rate first or 2) Pay off the card with the lowest balance first. Is one better than the other? Maybe financially so, but I’m a firm believer in doing whatever works. So if you want my two cents, I suggest selecting the one that would bring you the most peace of mind. If a feeling of success can be cultivated, after all, chances are it will help spur you to continue. Whatever strategy you chose, however, don’t stop when the card is paid off. In order to keep moving forward towards the goal of no credit card debt, shift the payment you were making to the now paid off card over to another card balance. You’ll begin paying that one off that much sooner without feeling the financial impact in your budget. When things get started, they have a way of snowballing. Start small, but get started and use the snowballing effect to your financial advantage.
Photo credit: Gunnlaugur Þ. Briem
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