Americans with at least one credit card carry an average of $15,950 in credit card debt, according to CreditCards.com. Credit cards provide an easy way to build credit and buy items you can pay for after your next paycheck, and they also offer valuable perks like travel miles, cash back and points to use toward dining and retail. Enticing incentives and the best of intentions to pay off your bills in full make it easy to start a domino effect of debt. Start fresh in 2014 with a commitment to pay down your debt and make your credit cards to work for you.
It’s nearly impossible to pay for your daily expenses and pay down debt without knowing what you’re actually spending. Create a monthly budget and factor in how much you can pay towards your debt. Slash non-essential spending on clothing, gadgets and dining out. Use an app like Spendee, which employs an easy to use interface to keep track of spending and then categorizes them accordingly. It’s easy to see exactly what you’re earning and spending.
Credit card companies typically charge interest every day of the month until your bill is paid on its due date. Shave off the interest by paying early or in two chunks. You could save as little as $5 a month on up to $100 a year depending on the average balance and interest rate. While it may not sound like much, paying early means you also won’t risk a late charge of up to $40. Those numbers add up if you’re carrying a hefty balance and need those extra dollars to pay toward your principal.
It’s easy to suggest getting another job, but it’s another thing to figure it out on top of full-time career, family and personal commitments. Make a list of your professional and personal skills and see how you can turn them into contract or freelance work. Also look at your current spending and income. If you’re receiving structured settlement payments, contact a company like J.G. Wentworth to potentially buy your future payments for a lump sum of cash now. You could then use this money to pay down or pay off your current credit card debt.
Escape High Interest Rates
If your credit rating is still in decent shape, look for a card with an introductory zero percent APR. Many offer the special rate for a year or more and allow balance transfers to the card. Putting your debt on a zero percent card keeps interest rates at bay and gives you some breathing room to pay down the debt. You can try repeating the tactic at the end of the introductory rate with another card. But be careful to read the fine print and keep an eye on your credit. Multiple cards with rotating debt can lower your credit score.
Keep Cash on Hand
It’s tempting to just never take out a card in the first place to avoid debt. But you don’t have to give up your credit card perks to stay in good financial shape. Instead, treat your credit card like it’s money coming directly out of your bank account for each transaction. Continuously pay off the balance of your card in full to keep on top of your expenses.
Remember to ask for help if your credit card debt starts to spiral out of control. Find a financial advisor to discuss available options and create an actionable plan to kick off the New Year.
Now over to you! Are you having any issues with credit card? Are you engulfed in credit card debt? What strategies are you using to prevent credit card debt? Please share your comments with us, using the comment box below.
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