There is a good chance that credit card payment is a topic you would least likely be excited about. Some people even put the blame squarely on their credit cards for their financial woes. They believe that they are in serious debt because their plastic credit led them to unnecessary purchases. Their monthly statement is now riddled with expenses they wish they haven’t made.
This is a common sentiment among consumers dealing with credit card debt. However, you need to understand that this all boils down to your decision. The credit card did not tell you to buy those shoes in different colorways. It did not also walk to the counter all by itself to pay for a dress that you will only use once a year. All these purchases were possible because you decided to buy them.
At the end of the day, your credit card is just a financial tool and how it affects your finances depends on how you use it. Marketwatch.com shares an article that proves credit cards play a big part in the lives of people. One lender ran out of a specific credit card that they had to ship out plastic ones in the meantime for consumers.
This shows how dependent people are on credit card. It is also a good barometer of how ingrained the use of plastic credit is in the life of people. This is why credit card payment is one of the things consumers deal with on a regular basis. As the new year starts, it is again a financial chore that you are faced with.
Here are a few ways on how to get on the right track with your payments especially at the start of the year.
Audit your credit card use for the past month
This will help you manage expectations on what your first statement for the year would look like. It will be particularly helpful at the start of the year. This is because the holidays could have hiked your credit card use. You need to know how much of your credit card balance you used up last month to buy for gifts or even for eating out with friends.
It would help if you have a list of where you used your card for the past month. It would be even better if you kept a copy of the receipts. Together with your list, you can easily compare and confirm your past month’s expenses. This gives you an idea of how much your payment due will be in the coming monthly statement.
Check your monthly budget for the year
Now that you have an idea how much your payment will be, you then have to look at your budget. See how your pending payments measure up against your budget. BLS.gov explains that on an average budget, housing and food are still on top of the expense list. As you go further down, try to see how much you have for credit card payments.
There are times that you have to categorize if it was for food, incidental expenses, and others. This would take some time as well as patience as you sort through your expenses. The idea is to be able to have enough in your income list to cover your expenses including your credit card use.
Pay the amount in full
Ideally, you should always do this. It is a good financial practice to pay for your credit card statement in full every time. It helps you stay away from all those unnecessary fees and penalties from your lender. It also helps your credit score maintain a nice score and improves your finances. This is because you are making on-time payments as well as managing your credit utilization ratio.
However, your expenses the previous month can be quite extraordinary. As earlier mentioned, the holidays could have really done a number on your budget. This is one of the most obvious reasons why you could have a spike in your credit card payment requirement for the month. In this case, you need to at least make more than the minimum payment. This will help you lower down the interest payment you would be paying in the long run. As soon as you can pay the full amount then do so.
Have a credit card payment strategy
Putting together a credit card payment strategy might sound a little complicated but it will help you manage your expenses. It can be as easy as taking note of each card’s payment due date. You can jot it down or set an alarm on your smartphone. You can also automate the payments and rely on the notifications of payments made.
You can also look into debt consolidation to help you manage your credit card payment. The idea is to consolidate or combine your credit card balance into one card. Doing so would let you focus your attention on just one card for payment. One due date, one interest rate, and one amount to remember every month. This is a great idea as Forbes.com shares a lot of American consumers struggle to meet their card payments.
Heavy use means bigger rewards
There is a big chance that if you are using your credit card, you are racking up your points as well. This is one of the ways lenders incentivize you when you charge your expenses. If you understand how your rewards system works, you need to use it to your advantage. Check if your rewards can offset any billing amount or get you discounts on future purchases.
Be mindful of your spending
Financial problems can be caused by a lot of things and one of them is your credit card use. You need to make sure that you are always on guard with your spending. You have seen how your excessive usage of your card during the holidays resulted in a big payment amount. It is a good idea to be proactive and be mindful of how you use your credit card.
Prepare early for the holidays
One way to manage your credit card payment is to plan for expenses early on. There is nothing wrong with planning for your holiday expenses at the start of the year. The good thing about it is that you can take your time. You can create a list first and update it as you go along. You can set aside a specific amount every month until the holidays. This can help you save enough money and not have to rely on credit to purchase gifts for other people.
Check if you can have a lower rate
A good start to your year is a lower interest rate on your credit card. This can help you rein in your expenses in your budget. One option is looking for a new card that offers low rates. The downside to this is a hard pull on your score which could affect your credit score. You can explore giving your lender a call. Ask them if it is possible to get a lower rate on your card. Of course, you need to show that you have been a great client such as paying your bills on time every time.
Credit card payment is one of the things you have to deal with on a regular basis. Doing it right at the start of the year can set the tone for your payments for the rest of the year.