One of the things you know all too well at this point when you are an avid credit card user is the fact that you have to deal with interest fees along the way. This is especially true when you are not organized with your payment schedule and if you do not pay much attention on the things that you buy with your cards. You just depend on your statements every month to know the purchases you have charged on credit.
This is one of those credit card habits that will create financial chaos with the way you manage your money. If you are dependent on your statements to know what you have bought the past month then you are headed down a path that could lead straight to debt. Debt because you are unable to take on a proactive stand on your purchases being relegated to just monitoring and waiting what happens next.
This has a similarity with the way people abuse their bodies just like eating what they want or drinking all the alcohol they can think of. It can also be not getting enough sleep and just pushing their bodies to the limit. All these will take a toll on your body but if you just wait for what happens next and not do something about it, it might be too late.
People who are not too keen with guarding their finances especially when it comes to credit card use are sure to get into a lot of trouble more than just the interest fees. Payoff.com shared recently how Americans, especially Millenials are sufferring from what they refer to as Acute Financial Stress of AFS. It is similar to Post-Traumatic Stress Disorder where stress manifests itself in feelings and behaviours.
Getting a handle on interest fees
If you want to stay away from having to cough up extra money for interest charges and fees on your credit card, here are a few things you need to look into.
- Understand your grace period. There are a lot of factors in play when you start looking into your credit card repayment program. Apart from the amount and the due date, there are a few more things you need to get a grasp on and one of them is your grace period. According to Consumerfinance.gov, this is simply the time between the end of a billing term and the due date for a payment. To make it easier to understand, this is the amount of time you have to meet your payment without getting into a late status. When your due date and grace period is up and you still haven’t sent in payment, that is when interest fees will start to be added onto your account.
- Do not deviate away from your budget. There will be instances when you have to make adjustments on your budget to gain financial advantage like making unplanned investments. But when it comes to credit card use, you need to stick to what you have already set in your budget because deviating too much from what you have set can put your budget in a spiral down to debt. You need to take control of your budget so you do not lose money paying interest on your card use.
- Dedicate a fund for your credit card emergencies. This might be a little over the top for some people especially because they already have reserve funds for emergencies but it might be something you could consider especially if you are habitually running into credit card trouble and paying interest fees non stop. It would take away any strain you might put on your reserve funds so it can still cover big financial emergencies. At the same time, it can help you out of payment woes when you find yourself in a pickle with your card purchases.
- Consider payment automation. This is one of the those developments that you seriously need to consider to manage your payments better. This is helpful if you are using your card for recurring payments like water or electricity for the points or rebates. You can apply your card payment to be paid out automatically from an enrolled account every month. This frees you up and the only thing you need to do is make sure that the account has the funds to cover the payment. You might even be able to talk to your lender and ask if they can give you any incentives with your auto-debit enrollment like a lower rate or even a longer grace period.
How to lessen dependency on cards
There is nothing wrong with credit cards and paying interest fees are not to be blamed entirely on the card itself. You as the consumer and ultimately the one using the card has to learn how to use your card a little better. Here are a few things you can look into to help you with card us.
- Save up for a purchase. One way to lower your dependency on your card is to have some forward planning when it comes to your purchases. This way, you get to save the money weeks or months before you need it rather than making an impulse buy right there and then. Forbes.com explains that impulse purchases are those unplanned expenses brought about by a sudden urge to spend. You might think that you are just reversing the process but what you might miss out is that when you do not pay the full amount, you are paying interest fees on top of your monthly payments.
- Carry cash with you. Cash payment can change the way you deal with payments especially when you have been so used to just charging, swiping and signing for things you buy. For one thing, you get to see and feel the actual money leaving your wallet and your hands as you pass it on to the cashier to pay. Because of this, you get to choose the items more carefully and the best part is that you cannot go overboard. You need to stick to your budget because once you reach your limit, you cannot buy anything more than what you can pay for.
- Get a hold of your emotions. There are also instances where you might make emotionally driven purchases as a way of coping. You can be coming off a heartbreak and you head on out to the mall to do some what most people refer to as “retail therapy.” You buy things you do not need just to feel good. There are also some instances like being accepted for a job and you decide to shop for the best clothes your card can possibly buy. Be on guard with your spending especially when your emotions are questionable.
No one want to pay for interest fees and lose money along the way. There are a lot of people who are always on the lookout for the best bargain in town and you might get one but that will not mean a thing when you miss on your car payments and you get assessed with late charges the next time around. Use your card to your advantage such as rewards, cash back or even for the insurance. But do not fall into the trap of misusing your card and being in the red because of all the penalties and fees you have to pay.