The news about how people need to manage credit card debt better these days stems from the fact that they are now at alarming levels. USA Today shared an article describing that US household debt has breached marks last seen in 2008 financial crisis. Though it can also be interpreted as part of having a robust economy, it still carries a lot of risks.
Credit card use is not as easy as it looks. There are mistakes the even smart spenders make the leads to debt. This is further complicated by the fact that a lot of consumers carry a balance on their accounts. As this happens, small missteps are magnified and the repercussions are heightened.
One missed payment can suddenly lead to a big statement the following month. Missing a few of your due dates can have a negative effect on your score as well. This can ultimately cause problems down the line when you find the need to take out loans for big ticket items. From a house mortgage to a car loan and even student loans – your credit score can be a big factor in these loan items.
This is why it is important to keep an eye out with how you manage credit card debt. Depending on how you manage it, it can either yield better financial opportunities in the future or be a cause of concern for lenders and creditors. With this in mind, here are a few things to look into to help you manage your credit debts better.
Have only what you will use
One of the best ways to manage credit card debt is to be responsible for the number of credit cards you own. Based on a Gallup survey, American consumers have an average of about 3.4 credit cards. Of course, this is not indicative of the number of cards people have on the high side. There are credit cards opened on a whim and even store cards just to take advantage of store discounts.
Anything in excess will spell trouble and it applies for credit cards as well. Having too much can lead to charging too much on credit. Add the fact that the more you have, the easier it is to lose track of which card pays for what expense. As this happens, it is just a matter of time before you forget to pay for some of your credit card charges.
There are people who are able to work with a number of cards as they use each for a specific purpose. This comes with a lot of dedication and discipline in using credit cards. If it is not for you, it would be better to stick to a few cards and use them sparingly. As you do, keep tabs on the charges so you can properly account for them later on.
Manage credit card debt with buying only what you need
Needs and wants are two distinct items and the challenging part for a lot of people is identifying one from the other. There are times that the fine line is blurred and you might even find justification for switching from needs to want. Just like buying shoes, you need a new pair but you prefer the more expensive ones.
There are times when you also have to consider quality which comes at a premium. However, this should not always be a go-to reason to justify expensive expenses. You need to think about the payment that comes after and how you will pay for it. This can be a great barometer in helping you decide whether you can buy the item or not.
Pay the amount in full
The rule of thumb when using your credit card is to pay the full amount when you get your monthly statement. Although there are instances when minimum credit card payments are acceptable but this is more of an exception rather than the rule. You need to always make it a point to pay off your balance at the end of the month.
For one, this keeps you away from charges and fees that accumulate once you send minimum payments. It also helps you preserve your funds as you try and stay away from potential problems.This is because when an emergency happens and you have a balance on your payment, you could end up putting off your payment. This can result in bigger problems that compound over time.
Understand how your credit card rewards work
As you endeavor to manage credit card debt better, you also need to take a look at your card rewards. Forbes pointed out that these rewards usually results in a payment shift rather than an increase in charges. This explains that a lot more people are becoming smarter about the way they use their credit card rewards.
This a good trend and one that you need to closely look into. These rewards are being offered by lenders in hopes of luring customers in signing up. As you do, it only makes sense to make the most out of these rewards. They can be rebates, cash back or even items you can get when you use the card. The important thing is to understand your rewards and be able to use them wisely.
Regulate credit card debt with using cash more often
There is no doubt that cash payment can change the way you use money and it can also help you manage credit card debt better. As you use cash, you get to physically feel money slipping out of your hands. It also helps you budget better because you cannot use more than what you have. With credit cards, you can charge up to your credit limit which can is a common cause of financial friction when it comes to budgeting.
What you can do is to go on a card holiday every now and then and stick to cash payment. As this happens, you get to regulate not only your card use but allows you to manage credit card debt as well. You can do this on a regular basis or when you feel your credit card bill is starting to pile up.
Stick to your budget
As you manage credit card debt, one of the best strategies you could ever use is making the most out of your budget. Putting together and sticking to your budget can help you manage your funds and keep you away from debt. Your household budget will only be effective once you start using it.
If you put in a lot of effort in creating a budget but it remains on your computer, smartphone or in a paper in your drawer and you never take it out, it will be of no use to you. Your budget is there to help you ensure that you are properly allocating your income over to your financial obligations. Once you miss those, you run the risk of falling deeper in debt and an even harder time climbing out of it.
It is important to manage credit card debt to get a good handle on your finances and keep you away from potential debt. As you keep away financial complications due to unmanageable payments, you get to focus more on strengthening your financial future.