Did the unexpected deluge of credit card bills catch you off guard last month or have you denied your state of debt for quite a few months now? USA Today published a study early this year that showed that the credit card debt had hit an all-time high in the USA. Revolving credits including credit cards have reached an all-time high of over $1.023 trillion. Back in 2016, the average household credit card debt was around $17000. These are a few staggering numbers that speak a lot about the urban lifestyles and expense choices people make each day.
The numbers are not here to console you or provide you with assurance. In fact, unless you take active steps, it will be impossible for you to overcome your crippling credit card debts. Denial is the most significant vice of any debtor. Merely looking away from the bills will not make the debts go away. You need to face them with determination and a robust plan of action.
Work on a monthly budget
Start by making a monthly budget. You can always put those monthly planners and breathtakingly pretty Pinterest planner templates to good use by using them to plan your budget. That is the most critical and yet most-ignored step of debt management among people. If a simple spreadsheet is not enough, use online tools, mobile wallets, and finance apps to monitor your expenses. Several websites assist with planning monthly budgets.
If you have a family, especially kids, planning your expenses for the month is going to be a little harder than you expect. Look closely at hidden costs and cut unnecessary costs. For example – reduce printing costs by encouraging the conservation of paper. Printing tickets for movies are not as necessary when e-tickets are entirely viable!
Prioritize your credit card payments
In most cases, people end up with multiple debts over a period. These cause much trouble since they come with varying interest rates, payment dates and payment amounts. Right now, you may be paying three credit card debts at $100, $150 and $200 per month. The $200 debt looks most expensive at a glance, but what if you are paying $200 per month for a $5,000 debt and $100 for a $500 debt? When you compare the interest rates, the loan amounts and the APRs, you will be able to understand why some debts are costlier than others even when they seem to be low apparently.
It is your responsibility to sit down with all the loan paperwork and sort the loans according to their real cost. You need to pay off the most expensive outstanding debts first. Once you pay off the debt with the highest interest rate, paying off other debts will be much easier.
Never pay just the minimum balance
Paying the minimum balance against any loan stretches out the payment strategy. You will notice that as you pay the minimum balance, which is about 2-3% of the outstanding balance, your APR increases beyond your wildest imagination and your credit score plummets. We have bad news for you if you have not noticed that. You need to make an effort to at least double your minimum balance payments from this month. Paying the bare minimum, even when you can afford to pay a little more, is the ideal way of keeping yourself on the hamster wheel of debts, interests and pending payments throughout life.
Get rid of your credit cards
Do not throw them out just yet! Just stop using them at every excuse. That is the best way to prevent collecting debt from all possible and impossible places across town. Only use credit cards to obtain more points and to keep your account active. Ideally, use your card when you are at the gas station or when you are at the pharmacy. You can use your credit card to pay medical bills, especially if you have complete health coverage.
Do not use all your credit cards for this. Use only one that offers the best cash back offers and rewards per swipe. Leave the rest of your cards home, and far away from your kids. Resisting pizza when free credit cards are lying around the house can be very tough for adults and kids alike!
If you have tried everything and nothing seems to work, it is time for the killer move – debt consolidation loan. This process kills all your outstanding credit card loans, and it allows you to go back to your happy, worry-free life by reducing the number of monthly payments to just ONE! Isn’t that amazing? Instead of paying 3 to 4 credit card companies with various interest rates, you will have to pay only the debt consolidation company once a month at a flat interest rate.
Several online lending models do not rely on FICO scores and traditional qualification criteria. Several lending platforms offer amicable interest rates and quite unbelievable repayment terms irrespective of your current credit card statuses. When you have debts on multiple credit cards, it is understandable that your credit score has suffered. The newer start-ups out to help people and legal non-profits working to curb credit card debts among American citizens usually do not judge their prospective clients by FICO scores for counseling. Credit counseling is something every struggling individual should opt for before plunging into the pleasures of credit card debt consolidation.
Several experts also state that not changing your spending habits will never help you with your finances. Any financial aid for debt relief and payment is just a temporary fix. You need to pay the credit card companies or the debt consolidation companies at the end of the day. Unless you monitor your expenses, start new savings accounts and pay more than the minimum balance per month, it will be next to impossible for you to overcome your multiple credit card debts.