Paying off credit card debt can seem like a long journey to the finish line. Revolving credit card debt can also be a challenge when you are cash-strapped. Rising interest rates and inflation can make it even more difficult to avoid using your credit card when you're trying to afford to live. How can you avoid making mistakes when paying off credit card debt? Here are a few tips to help you manage your credit card debt and determine if it's good or bad debt.
Solutions for Managing and Eliminating Credit Card Debt
Mistakes to Avoid When Managing Credit Card Debt
1. Paying Only the Minimum Required Payment - When you receive your credit card bill, it's important to pay more than the minimum payment, so you can reduce the interest you are paying for your purchase. If you pay only the minimum amount due, it could extend how long you are paying for the debt and can result in you paying for an item above the price you purchased it for. For example, if you bought a $25 shirt and only pay the minimum payment in two years, you could have paid $60 for the shirt, depending on your interest rate.
2. Signing Up for Credit Cards to Save 10% on Your Purchase - It may seem like a good idea at the time to save 10% or more on your store purchase, but if you don't pay off that credit card purchase within the specified time you could be subject to high-interest rates for your purchase. The 10% in-store savings could cost you more than you saved. You may also e the card repeatedly when you only wanted the one-time savings offer.
3. Paying Off All Your Credit Cards at the Same Time - When you address your credit card debt, it's important to prioritize your debt payments. There are different debt payoff methods that you can use to help you determine which debt you can pay off the quickest and the savings that will result. You can use the PowerPay tool to determine what's best for you financially.
4. Forgetting Your Goals - Keeping your goals at the forefront of why you want to pay down your credit card debt is essential. Writing down your goals or creating a vision board of your future can help keep you on track when paying down your credit card debt.
See my feature in Are Americans Afraid of their Credit Card Debt?
How to Stay Focused on Eliminating Your Credit Card Debt
If you're struggling to eliminate your credit card debt, here are a few tips to keep you on track.
5. Determine Your Debt Payoff Strategy - Using the PowerPay tool, you can determine if you want to focus on your highest interest rate, shortest term, or shortest length of time to pay off your debt. This tool also provides you with a mon h-by-month payment plan so you can put reminder dates on your calendar.
6. Use a Debt Paydown Calculator - Using a debt calculator can help you show how much you can afford to put towards your debt so that you can address your outstanding credit card debt.
7. Discuss Your Goals with Your Partner - If your partner is not on the same page, it can become more challenging to address outstanding credit card debt. Ensuring that your partner is aware of the importance of reducing your debt load can ensure that you are not fighting a losing battle. If one partner is paying down the debt and the other adds to it, it can cause significant stress and strain on the relationship. Take time to sit down and discuss your goals with your partner.
When is credit card debt good?
Credit card debt is good if you have future financial goals requiring a good credit score to accomplish them. Building your credit score can help you reduce future interest rates and aid you in qualifying for large purchases. Having credit card debt and paying more than the minimum consistently can help you:
Qualify for a future home loan
Qualify for a future car loan
Reduce your insurance rate
Reduce the need to pay a security deposit for a cell phone
Help you qualify for an apartment
Obtain employment that requires a credit check
Earn reward points for purchases
To reserve hotel and airfare
See my feature in How to Get an 800 Credit Score
When is it considered bad debt?
Credit card debt is considered bad when you cannot make more than the minimum payments for your purchases. Also, using it to sustain your living expenses can make it even more difficult to pay off the debt. Cash advances may also cause significant debt payoff issues because the interest rates accrue immediately. It's important to avoid using your credit card to pay for monthly living expenses because it's easy to lose control and difficult to repay the debt.
Final Thoughts on Addressing Credit Card Debt
Consider your options and educate yourself before using your credit card to pay for a purchase. Determine if there are other ways that you can afford your purchase. Getting into credit card debt is easy, but getting out of credit card debt can come with significant hurdles and challenges. Remembering your goals can help you decide what's best for your financial situation.
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