If you have been mismanaging your finances, it is not surprising to receive a huge credit card statement at the end of the month. A big part of proper money management is to make sure that you keep an eye out on your credit card use. You need to understand that your credit limit is the amount of pre-approved loan a lender has extended and not actual money you own.
That being said, it is not money you have saved up over the years for an emergency. It can be used for emergency situations but only if you do not have any emergency money saved up. You need to be smart with your credit card use where it should strengthen your finances and not put you in the red. Credit cards can actually help you manage your money better only if you know how to use them.
One sign that you are misusing your card is getting a huge credit card statement every month. This can throw you off your budget and constantly keep you in debt. As you continue on this path, you will slowly notice that the total balance due in your statement keeps on increasing month to month. It can even come to a point where you can no longer keep up with the payments.
Once this happens, you might slowly try to look the other way hoping the problem will go away. As CNBC shares that the average American consumer has over $4,000 in credit card balance, choosing to forget about your financial obligations will only result in bigger balances in the coming months. Not to mention all the fees, interest, and penalties you will accrue on your statement. If you want to manage your credit card statements better, here are a few things to consider.
Check the statement thoroughly
As soon as you receive a huge credit card statement in the mail or even with an online copy in your email, the first thing you need to do is open it. Believe it or not, procrastination is a trait a lot of people possess especially when it comes to their finances. As soon as they see their credit card bill, they shove it under the pile or put it in a drawer to forget about it.
You need to open your statements as soon as you receive them. If not, designate a certain day in the week where you get to sit down and go through your payments. This can help you condition your mind on what you need to do. It can also help you create a financial habit in attending to your payments which will be beneficial as you get older.
As you develop the habit of looking at your card statement, you now get the chance to catch mistakes in your statement. It could be the case of a payment not being posted or even charges you did not make. One possibility is that your supplementary cardholders could have charged that amount. It could also mean that your identity has been stolen and thieves are starting to charge several items on your credit. Contact your lender immediately as soon as this happens.
Identify the best repayment method
If you are dealing with a huge credit card statement at the end of the month, the most ideal way to manage is to pay for the entire amount in full. This is the best way for you to avoid being slapped with hefty fines, interest rates, as well as other charges. This can also go a long way in keeping your credit score in pristine condition.
If your back is really up against the wall, take a look at your rainy day fund and assess if it can help you get out of your situation. Remember that your rainy day fund is just a part of your reserve funds. This is not to be confused with your main emergency fund. Your rainy day fund is meant to help you with smaller problems but if it can be added to what you were planning on paying, it might be worth it. Just remember to replace it immediately after.
You also have the option of looking into debt repayment programs to help you better juggle your credit card payments. It might come to you as a last resort but these programs are in place to give you an easier time with your payments. You might think that once you sign up for any of these programs, you are already a hopeless case where in fact, you are only thinking about your finances.
Consider debt consolidation when getting a huge credit card statement
There are a number of programs you can look into such as counseling and even settlement. However, one of the more popular approaches is debt consolidation. It basically gives you the ability to combine multiple debt payments under one account. At the onset, this makes it a lot easier for you to manage your payments.
This is because you can focus on a single payment and due date every month. This can considerably lower down the chances of overlooking a payment and being assessed with fees after. As you are able to manage your payments better, you also increase the chance of improving your credit score. With on-time payments, your score can increase over time.
One of the best advantages of credit card debt consolidation is the fact that you can have a lower monthly payment if you get to consolidate on a 0% interest rate card. Remember though that these types of cards offer only this rate at a limited time. Once you go over that, you could be paying for regular rates or at times, higher than the ones you previously had. Make sure you pay off the balance before the introductory rate expires.
Make the most out of credit card rewards
If there is one good thing that can come out of a huge credit card statement, it is that card rewards get credited to your account. This can be anything from cashback opportunities to points you can use in various establishments. These should not be your end goal on why you spend so much your card. This is because if you are driven by rewards, you will purchase just about anything even if it is already out of budget, just to get that reward. Bloomberg shares that most Americans prefer a cash-back reward system for their credit cards.
Strengthen your finances
One of the possible reasons why you are having to rely on your credit cards every month is that your finances and lifestyle might not be on the same level. It is most ideal if your lifestyle is way below your income so you have more room to save and secure finances. If they are the same, you will only break even and not have any savings. However, if your lifestyle is way higher than your income, you will start to see huge bills with no way of paying all of them back.
One way to help you manage this is to take on a frugal lifestyle. This is where you aim to live below your budget and try to get creative with your expenses. You can start cooking rather than buying food, looking for places to visit nearby rather than going on international holiday trips. It can also be using a bike to get to work to get some exercise in and save money at the pump.
To help you increase your income, you can look for income-positive hobbies to help you earn money while doing something you already love doing. As you do this, look for other ways to diversify your income such as working online a few hours at home on weekends or even putting your money on investments. All these can add up and help you strengthen your finances.
It is not ideal to receive a huge credit card statement at the end of the month but there are a number of ways to help you deal with them.