Managing a credit card account is fairly easy with the right discipline. But did you know that a large number of credit card users have difficulty paying off their balances, especially when it reaches above the $1,000 mark? A large percentage of these users can’t pay off their balances even after a year of carrying it. When balances and interest charges add up quickly, it’s easy to end up in debt.
Signs That You Are Deep in Credit Card Debt
The tell-tale signs that you could be in credit card trouble include:
Maxed-out Credit Limit
No matter how you avoid using your credit card to get by, you simply have no cash to spare even for basic purchases.
You Borrow to Pay
You borrow money from friends and relatives to pay off your credit card balances.
Making Only Minimum Payments
Stated by a credit repair specialist, the minimum monthly payment barely covers the interest charges that accumulate every single month, yet you cannot afford to pay more than that amount.
Tapping on Emergency Fund to Pay Off Balances
Your emergency fund is there to cover you for unforeseeable events such as sudden loss of a job or negative effects in an economic downturn. This fund is the last place that you should draw money from to pay off your “everyday” balances. This should be an account you continue to build and rarely pull money out from.
You’re Missing Payments
When your repayments funds are not enough, you will begin to miss payments. When that happens, you’ll start to experience the negative impact of these on your credit report and credit score almost immediately.
How to Handle Credit Card Debt?
First off, stop being in denial that you are in debt trouble; doing so will only cause you to avoid taking the necessary and immediate steps to reverse the damage to your credit record.
Here are a few simple strategies that you can do on your own to manage your credit card debt:
Stop Making Unnecessary Purchases
This is probably the most common-sense approach. Regardless how much credit “opens up” again because you were able to pay off a portion of your balance, resist the temptation of using that to make additional or unnecessary purchases.
Pay Off Balances With High Interest Rates First
This tactic will save you more money that you can then add to your repayment fund. Some people do the reverse method where they pay off balances with the least amount first because they find it much easier. Either way, the overall effect is the same because you’ll have less and less balance and interest charges at the end of each month.
Take advantage of balance transfer programs of other credit cards that often have zero interest for 12 to 18 months. With interest charges out of the way, you will have a good opportunity to catch up on your late payments.
How to Avoid Accumulating Credit Card Debt
In order to avoid accumulating credit card debt at the onset, keep in mind the following:
- Pay at least 20% of your outstanding balance each month
- Always pay bills on time to avoid incurring late charges
- Keep a spending plan and avoid unnecessary purchases
- Trim off expenses to free up some cash where possible
- Consolidate your card balances into one account for easier pay off management
A lot of people end up in credit card debt because they underestimate the amount of discipline that is required to manage such an account. Credit cards are products designed to make you spend – that’s how your banks or credit card companies make money. If you give in to their subliminal influence, it is sure to work against you.