It’s all too easy to get in trouble with credit card debt, and you may feel like the forces are beyond your control. However, experts warn that you can see problems with debt on the horizon and take steps to avoid them. Rather than letting the debt spiral out of control like a terrible car accident, learn from the mistakes of others and follow these steps to remain the master of your financial destiny.
You Cannot Maintain Your Lifestyle on Credit
The hero of our tragic tale uses credit cards to maintain an unaffordable lifestyle of comfort and extravagance. She uses credit to buy name-brand purses and expensive shoes while he uses the convenience of plastic to charge extravagant vacations. The minimum payments are barely enough to keep the wolves from the door, but they will soon start to circle closer. The first step you must take to avoid disaster is to stop charging.
Stop Assuming that the Debt Will Naturally Shrink
Too many people assume that the credit card debt will take care of itself. They expect the debt to start shrinking just from making minimum payments, but they continue to charge and ensure that the balance never falls. You need a plan for paying off the debt. It starts by creating a budget and following it. It continues with looking for better interest rates and moving balances over when possible. Use the snowball method of debt repayment. Make minimum payments on all accounts except the smallest. Put all extra funds on this account to pay it off quickly. Once it is paid in full, start applying those payments to the next card in line. Continue the process until they are all paid in full.
Credit Cards are an Easy Solution
The credit is there and readily available. Easy, convenient and singing a musical song like the mythical siren, credit cards lure you to your financial ruin. Learn from the mistakes of others who have washed up on the rocky shores of financial ruin. Stop using charge cards for tempting deals, frivolous purchases and other material splurges. If you, too, easily fall victim to the allure of convenient purchasing power on credit, then take steps to stop yourself. Leave the cards at home. Cut them up and throw them out. Freeze them in a block of ice to put an end to impulse purchases.
Ignoring the Real Cost of Credit
It’s so easy to charge purchases when you’re only viewing the monthly payment. You justify it by saying it’s only $20 a month, or even $50. However, the cost is far higher than this. Start by looking at how much you are paying out in minimum payments. Is it enough for a nice dinner out? Perhaps the combined minimum payments are as much as a car note. Sit down and do the math; you may be shocked with the answer. The other expense comes in the interest, annual fees and occasional miscellaneous charges like late fees and over-the-limit fees. Understanding what the true cost of your credit is can help you get the charging under control and prevent the tragic ending.
As you bring spending under control, learn to live within your means and follow a plan for paying off accounts, you will become the master of your own destiny. You will no longer lose track of accounts and miss payments because your cards will all have zero balances. You may even learn how to effectively use rewards cards for the perks while paying them off at the end of every month. With these changes, you can avoid tragic accidents and enjoy a strong financial future.
Image Credit: Andres Rueda
- License: Creative Commons image source
Derek is an active finance blogger. When he is not blogging, he enjoys working at an accounting firm outside of NYC. The article above is for new jersey credit unions.