Do you have untamed credit card debts? Having a credit card balance is bad enough but there is something worse than that. When your debts are “untamed” it means it has grown so much that it is already beyond your control. It becomes difficult to pay off because your financial capabilities are no longer sufficient to pay it off.
According to reports, 29% of Americans have more credit card debt than emergency savings. While it is not clear from this report if these people are in financial trouble, it can easily be assumed that they may be heading that way. After all, an emergency fund is one of the signs of financial security. If you do not have it, your financial position is in a fragile state. All it takes is one emergency situation to find yourself in the face of a financial problem. Add that to your debts and all that will turn into a financial crisis.
The truth is, you are not discouraged from using credit cards. On the contrary, we recognize the convenience and security that it can bring to your life. However, this can easily be abused. You need to develop the skills that will help you manage your credit card purchases wisely. This is how you can keep it from turning into untamed credit card debts.
Why you should tame your credit card debts
There are a couple of reasons why you need to keep a tight lid on your credit card purchases. You want to keep it tamed because it can have a significant effect on your financial future. If you are serious about building wealth, you need to try to control how you use your credit cards. You have to be vigilant with its balance because of the following reasons.
It has a high-interest rate
Credit cards are notorious for having really high-interest rates. According to the recent data, the average APR is at 16.46%. This is the interest that is used to calculate the finance charge that is added to your current debt. If you only pay the minimum requirement, anything that is left will be carried over the next billing cycle. Whatever is carried over will have the finance charge added to it. If you keep on carrying over a balance, this will make your balance grow significantly. The higher the interest rate, the faster your credit card debts will grow. Over a couple of months, you might be surprised that your debt has already become so untamed that you can no longer afford to pay even the minimum.
It can lead you to even more debt
Apart from the high-interest rate, there are so many factors that can raise the balance of your debts. These include fees, terms, etc. If your credit card debt becomes too much for you to pay off, that might lead to late penalty charges. That can add to your balance and make your finance charge bigger.
And if you decide to prioritize your debt payments, there is a possibility that you will compromise the cash for your basic necessities. When this happens, you might end up using your credit card to pay for food and groceries. Both of thee scenarios are not really ideal if you want to improve your financial situation.
It can pull your credit score down
If you do not tame your credit card debts, you will end up pulling your credit score down. There will be many factors working against you. First of all, if your debt becomes too high for you to pay off, you will end up with late payments. That can have a huge negative impact on your credit report. And if you have a high balance, that can also affect your credit utilization rate. These are only a few of the negative effects that untamed credit card debt can bring to your life.
It can compromise your future
Finally, credit card debt can be powerful enough to compromise your future. If you do not pay it off, it can keep you from having a secure financial future. It can jeopardize your retirement. Instead of focusing on your dream life, debt can bring a lot of stress in your life. That stress can lead to physical illness or broken relationships. While you are still young, you need to work on paying off your debts. Do not let it grow too much that it will dictate the type of future that you will have. If you fail to solve it, you will be forced to keep on working until you drop. You might end up losing all the assets that you have worked hard to accumulate over the years.
How to tame your credit card debts
Without a doubt, you need to learn how to tame credit card debts. It is the only way that you can improve your personal finances.
If you are thinking about paying off your debts this year, you are not alone. A survey revealed that 6 out of 10 people have made it a part of their New Year’s resolution to pay off what they owe on their credit cards.
Of course, setting the goal is only the first step – and the easiest one. The hard part is providing the actual payments and sticking to the debt relief plan. If you want to be successful, you might want to check out these tips.
Analyze your payment capabilities
Start by looking at your current financial position. You want to check your payment capabilities because that will help you decide on the right debt relief program to use. While all the available debt solutions are effective, your ability to commit and meet the payment requirements will dictate its success. Look at your income and determine the various expenses that you have each month. Try to determine if there are expenses that you can cut back on. Doing so will allow you to increase your debt payments. The higher the debt payments, the faster you can get out of debt.
Choose a debt relief program
Once you know how much you can afford to pay, it is time to choose the right debt relief program that will make your payments easier. If you can afford to pay off your debts, then you have more options like debt consolidation, debt management, balance transfer, etc. However, if you do not have enough and you need a debt reduction, you might be better off using debt settlement. You need to be honest about how much you can pay so that you will not waste your time trying to make a particular repayment plan work if you cannot afford it.
Take note that you have the options to do the debt solution yourself or you can look for debt relief companies who can help you. Hiring a professional will make things easier for you but it will cost you.
Live below your means
Finally, if you really want to keep your credit card debts tamed, you need to make it a habit to live below your means. This is the best way to get the extra money that you can use to improve your financial position. If you earn $4,000 a month, make sure you only live on $3,500. That way, you still have $500 that you can use to save, build up an emergency or give your retirement funds a boost. It helps to put aside the $500 as soon as you get your paycheck. That way, you will not miss it. Keep it and then forget about it. You will just be surprised that you already have a significant amount saved up. This fund can help secure your future and ensure that you do not have to turn to debt to get out of an emergency situation.