Are you trying to bounce back from credit card debt this year?
There is a good chance that your finances took a big hit when the economy came to a halt. People were asked to stay at home to help lower the transmission rate of the virus. This resulted to low foot traffic in businesses and companies were left with no choice but to adapt. There are some who were able to transition to a work-from-home set up for their employees. But for the others, they were forced to shut down.
This left a lot of people out of work and if you were one of them, your savings will play a crucial part in tiding you over from one payment to the next. It now becomes a question of how robust is your emergency fund. The stronger and bigger it is, the more you can stretch it to over more of your family’s expenses. If you barely have enough or if you do not have any savings, you could have tapped into your credit cards to shoulder your expenses.
This is the reason why you could be looking for a way to bounce back from credit card debt. As the economy slowly tries to open up again and adjust, your financial opportunities might have improved. This could mean being recalled back to work or finding a job somewhere else. The point is that you have the chance to work on your credit card debt. But why you do need to focus on it?
You might have other areas in your finances that you need to focus on. But your credit card debt is quite unique. As easy as it is to borrow against your credit, repayment is a totally different struggle. There is no denying the fact that paying credit card lenders back is a challenge for most people especially when they had to use their cards out of necessity.
If you want to start bouncing back from card debt, here are a few things to look into to help you get ahead of your payments.
List down your credit card debt
If you want to bounce back from credit card debt, the first step is to list down all your payments. You need to have a clear idea of what you need to work on. It will be difficult to try and mentally stay on top of all your credit card payments. If you are only working on one card, that might be doable. But you will start to feel overwhelmed when you juggle several card payments.
The key component of this list is being detailed as much as possible. It is important that you put in as much detail as you can into your list and not just the amount you have to pay. Yes, that is crucial but you have to make sure you include all the details about your payments. It will also help to have your lender’s details on the list as well. It helps to know that Value Penguin shares how the average credit card debt for consumers is just over $5,000 in 2020 from $6,194 in 2019.
A good start would be to list down all the basic information about your credit card debt. The payment amount and due date are crucial information you need to have on your list. Put in the interest rate as well as the minimum payment amount to help you make informed decisions later on. It will also help to include your lender’s details just in case you need to reach out to them regarding your payment.
Rearrange your household budget
If you want to bounce back from credit card debt, your household budget will play a big part in it. After creating your payment list, you now have a clear idea of how much your payments are. The next part of the process is trying to figure out if how much your income is every month. This is more crucial as the economy is just starting to pick itself back up again.
The goal is to have a comprehensive household budget so you can account for every dollar you make. It seems extreme but coming off a pandemic and trying to get your finances in order will be no small feat. Credit card payment is important because if you fall behind, you can end up paying more than what initially borrowed.
Your household budget is a flexible financial tool you can adjust when you need to. This is why when you are trying to pay down your credit card debt, you can adjust and rearrange your budget to help you with that objective. But you need to make sure that when you do that, you do not forget about other financial responsibilities as well.
Create a repayment plan
To help you bounce back from credit card debt, you need to have a solid repayment plan. On your own, there are a couple of options to choose from. One is focusing on the account with the highest interest rate. This is where your list will come in handy. Look for the account with the highest rate and pay it down more aggressively.
What this helps you with is give you the chance to save money you would have paid in interest and fees in the future. Another option is to locate the account with the lowest balance and pay it off as soon as possible. Doing this helps you build up your confidence and gives you mental financial wins. When you pay it off, use the amount the frees up and add it to the next payment. Do this until you pay everything off. One other option is debt consolidation.
As the name of the plan suggests, this is a strategy where you choose to combine your credit card payments under one account. The main benefit of this approach is it simplifies your repayment process. Rather than monitor multiple accounts, you only have to focus on a single payment due date. This will help lessen the chances of overlooking and missing a payment.
Bounce back from credit card debt by looking at your long term goals
To help give you that push you need, it helps to focus also your thoughts on your long term financial and life goals. To get there, you must overcome the challenges life throws your way including your credit card debt. Every single time you pay high-interest fees and other penalties, that is money being taken away from your goals.
If you want to retire at a certain age, you need to make sure that you are able to save for it. Huge credit card payments might push that retirement age further away from you. The same goes for trying to pay off a house in record time or even in pursuing post-graduate studies. Pay down your credit card debt and use the money to reach your goals.
Use your credit card to your advantage
There are times when you can actually use a credit card to your own financial advantage. It can help you budget your money better. But you can do this if you can control your purchases. One way to use cards is to assign each of them to specific expenses. CNBC shares that Americans carry on an average about 4 credit cards under their name. You can have one card dedicated for all car-related expenses and have another one for all food purchases for your family. One card can also be used for non-essential items around the house like new pieces of furniture or appliance.
This way, you can monitor each expense carefully with the statement that you get before your payment due date. You can check every time you used the card and make sure you do not go over budget. It also helps if you can make the most out of the rewards and even cash back on your credit card. This can give you additional savings in your budget.
It is challenging to try and bounce back from credit card debt this year but it does not mean you will give up. There are a few things you can do to help you bounce back and get back on the right path.