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Digging yourself in a credit card debt pit does not happen overnight. If you find yourself in a deep hole and struggling with too much debt, you have to admit that it is your bad habits that got you there. There are many warning signs that will tell you that you are already digging yourself into a debt hole. If you are not careful, your actions might lead you straight to bankruptcy. According to the study done by BostonFed.org, credit limits usually increase quite fast during its first few years. Between the ages 20 and 30, it can increase by 400% or more. When this happens, you can expect that card holders will feel a kind of rush and will most likely spend more than they should to celebrate that increase. This probably explains why a lot of young adults are struggling with credit card debt. The study revealed that the debt levels of consumers usually rise and fall in response to changes in their credit limit. If you are struggling with your debt, you need to consider how you can pay that off first before you make any other financial decision. With the interest rates poised to increase this year (thanks to the Federal Reserve), lowering your credit card balance in the next few months is a must.
4 habits that will keep your credit card balance highWe have mentioned that your credit card debt is high because of several habits. Usually, this does not happen overnight - unless you used your card to pay for an unexpected emergency, which is still a bad move on your part. Whatever you did to make you fall into this debt pit, it is important for you to identify it so you can stop doing it. If you do not stop, you will never get out of debt. You can never free yourself from the bond of slavery that your credit card payments will put you through. If you are unsure of what is keeping you in debt despite your regular monthly payments, here are 4 habits that are probably causing you stay deep in credit card debt. Habit 1: You only pay the minimum. The first habit is paying only the minimum requirement. According to CreditCards.com, the minimum payment requirement of credit cards is now higher because the government mandated creditors to make the change. Paying a low amount each month will keep card holders in debt for a long time because most of the payment goes to the interest of the balance. Only a little goes to the principal amount. Paying only the minimum payment requirement will eat a little of your principal debt and staying at it will keep you in debt for a very long time. You want to avoid this as much as possible. Habit 2: You ignore your statements. The other mistake that you can commit is to ignore your billing statements. There is no reason why you should do it - unless you are in denial. While being face to face with your debt situation is scary, that is not a valid reason to ignore your statements and run away from your obligation to pay it off. That is not the best way to make your problem go away. It will make it worse. Just face the truth about your credit card debt and make a commitment to pay it off slowly. That is how you should deal with this. Habit 3: You keep on using your credit card. If you know that you already have a high balance, you need to stop using your cards until you have paid it off. If you pay a portion but you continue to use it for purchases, you will never pay down what you owe. Why not keep your card for a month or two, until you have paid off a significant portion of your balance. When you have lowered your balance, you can start using your card once more - but only for purchases that you can pay off in full at the end of the month. Habit 4: You do not change your bad spending habits. This is actually in reference to all the other bad financial habits that got you in debt in the first place. If you do not use a budget plan or if you spend beyond your income - these will really keep you in debt. If you want to be free of the high interest credit card debt, you have to admit to yourself the mistakes that got you in this financial position. Stop pointing fingers and admit your fault - that is the best way that you can change your financial position so you can work on improving your finances. Once you get out of your debt, it will be easier for you to make plans to improve your life financially. Eliminating these 4 should be one of the best financial movesthat you can make before they start raising your credit card interest rate.
4 steps to deal with your credit card troublesWhen you have identified the changes that you need to make to put your credit card debt in order, it is time for you to aggressively work on your debt situation. According to an article published on NerdWallet, the average American household owes more than $15,000 on their credit cards. The study revealed that 3 out of 10 consumers are actually ashamed to admit that they have this much debt on their cards. They would rather suffer in silence in hopes that they can pay off their debt without letting anyone know of their financial predicament. If you want to completely pay off your credit card debt, here are the 4 steps that you may want to follow.
- Know your financial capabilities. First of all, you have to know your financial capabilities. You need to understand what you are capable of paying before you can decide how you will aggressively pay off your debt. Do you need to a lower amount compared to the minimum payment requirement? Or can you afford to pay more than the minimum? Knowing your financial position and your ability to pay off your credit card debt will allow you to come up with a debt relief strategy.
- Find the best debt solution. After you have determined your financial position, it is time for you to research the best debt relief programthat can get you out of debt the fastest. Take note that it is not only about how much you can afford in terms of monthly payments. You also have to consider your future financial plans. For instance, debt settlement can help you reduce your debt but it can damage your credit score. Although you can always rebuild your score after you have paid off your debt, some people do not want to damage their credit reports because of future credit plans (e.g. home loan). You need to explore other options like debt consolidation or debt management. Know all your options so you can make a smart decision about your debt.
- Commit to your chosen payment plan. Once you have chosen the debt relief plan that will get you out of credit card debt, make a commitment to complete it. Sometimes, failing to complete a plan could end up damaging your finances further instead of improving it. For instance, if you use debt consolidation loans but you do not follow through with your repayment plan, you could end up with more debt to your name.
- Change your bad financial habits. Finally, you want to correct all the bad financial habits that got you into debt. If you did not follow a budget plan, now is the time to start using one. If you do not have an emergency fund and that caused you to borrow a lot of money on your card, you need to start saving up for one. If you are an impulsive spender, you have to change that addiction and be a smart spender.