RDFS - Why Credit Card Debt is Your Worst Financial Enemy

Credit Card Debt is Your Worst Financial Enemy

A credit card account is tempting as you can get whatever you want on credit as long as it is within your limit. But if you’re not careful, it can turn into a problem.

It is always advised that you shouldn’t make purchases you cannot afford to cover at month-end, because the interest rate is charged on your debt until you repay it in full. Payment is usually due at month-end and failure to pay results in the accumulation of your debt as annual interest is charged on the amount owed. There is also a minimum payment of 1% to 2% of your balance plus other charges that must be made in order to ensure you keep your account in good standing. If you pay less than this minimum payment, interest and penalties will be charged and your debt will keep on accumulating. Failing to make your minimum payment on time will negatively impact your credit score, and could also make future lending more difficult. Owning a credit card account can be a nightmare if not properly managed.

Tips On How To Overcome Credit Card Debt

Overcoming credit card debt begins by taking charge of your spending. Here are some tips on how you can manage your credit card debt:

Know Your Credit Card

Get as much information as you can on your current credit cards or potential ones. Research the issuer’s interest rate, fees, payment schedule and other terms and conditions. Be sure to confirm the interest rate and other fees that will be charged if you are late in making your monthly payment (although you should always pay on time!). You can set up automatic payments through your online banking and calendar alerts to avoid falling behind on your payments. 

Be Disciplined

You should set spending rules on your credit card that you must follow. You can set a limit on your credit card expenses in a month. This will give you control of your spending and ensure that you live within your means. It is advisable to only charge on your credit card what you cannot normally pay for with cash or debit card.

Keep Track

You should routinely keep track of the status of your account at least every week. Charges accumulate without notifying you, so it is advisable to check your account at least once a week to know the state your account is in. Adopting this principle will help you track your credit card debts, the types of credit you have, and your repayment history. It can also help you identify potentially fraudulent charges.

Avoid Cash Advances

Having a credit card account to pay for things when you can’t afford them is quite tempting, but you should never rely on a credit card for cash. Cash advances from your credit card account result in higher interest rates and transaction fees. In addition to higher interest and fees, interest is charged immediately when you take the cash advance. Avoiding a cash advance will put you in full control of your credit card.

Tips On How To Prevent Accumulation Of Credit Card Debt

Credit card debt is easy to accumulate but difficult to do repay. The only way to avoid credit card debt is to prevent it from accumulating in the first place. Here are some tips on preventing credit card debt accumulation:

Negotiate Your Interest Rate

Negotiating your interest rate on your credit card debt will go a long way in reducing credit card debt accumulation. The interest rates on your credit card debt are what make it difficult to settle your debt. Negotiate your interest rates with your credit card issuer so you can get the best deal possible.

Forget You Own A Credit Card Account

Once you are in heavy credit card debt, you should consider putting your credit card away until you can get things back under control. This will lighten the burden on your credit card account by keeping your balance within a reasonable limit. If you can avoid using your credit card for a while, it will go a long way to reducing your debt. 

Always Make Your Payments on Time, and Never Pay Less Than The Minimum

Simply put, what makes your credit card debt pile up are the charges and interest rates on delayed payments. The best way to get over this is to pay your credit card debt on time. Missing a payment can leave you playing catch up. While you should always pay at least the minimum, it is ideal to carry a 0 balance on your card.

Watch Your Spending

A credit card account can leave you spending lavishly but you need to caution yourself and stick to what you can afford. Remember, at some point you will have to pay it back! Always avoid unnecessary spending.

What To Do If You Still Need Help

If your credit card debt is starting to mount, talk to us. We can look at debt consolidation and other financial plan solutions to help you pay down your debt quicker. Contact us today.