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Did you just make your final credit card payment? Congratulations are in order then! Completely paying off your credit card debtis no easy feat. It is like reaching your ideal weight. All the effort and sacrifices are worth it because you know that you can finally loosen the restrictions that you had in your budget. Paying off your credit card balance came at the perfect time. According to an article published on Bankrate, credit card rates in 2016 are bound to rise because of the Federal Reserve raised the short-term interest rates. You can expect that credit card companies would follow this increase by raising the rates of the consumers. That means you can expect a higher finance charge if you continue to carry over your balance to the next month. This will effectively raise the minimum credit card payment that you need to meet on a monthly basis. This is even more dangerous for those who have a bad credit history. Lenders and creditors view a bad credit report as a sign of a high-risk borrower. They will protect their interests by imposing high-interest rates. Thankfully, you already made your last payment - which means you do not have to be bothered with this piece of news. As far as you are concerned, you do not have a credit card debt problem anymore.
Smart financial moves after paying off your credit card debtDoes this mean you can go out and celebrate now? Probably. But before you do that, there are a couple of smart money moves that you need to look into. Although you already paid off your credit card balance, there are still a couple of habits that you need to continue doing. It is just like reaching your ideal weight. You have to make sure that you can maintain that weight. If you start to relax and completely let go of your eating restrictions, you can gain the weight that you just lost. You need to be careful about what you will do and how you will live your life from here on. At least, this is true if you want to maintain your balance after making the last credit card payment. Most of the financial moves that you need to do after will revolve around the money that will be freed. After all, you no longer have to make payments toward your credit cards. You want to make a smart decision as to how you will use that money to improve your finances. Here are 5 smart money moves that you can do after you have made your last credit card payment. Focus on other debts you have. Before you celebrate, take a look at the other debts that you have. You may want to consolidate your other bills. If you have other debts with a high-interest rate, you have to concentrate on paying them down too. According to a publication released by the FederalReserve.gov, when you allocate a huge part of your income on your debt payments, you have fewer funds to finance your lifestyle. Some households with high debt levels are in danger of defaulting on their loans when an emergency situation strikes. Do not wait for this to happen because this can lead to more financial problems. So while you are on a roll, you may want to continue paying down your other debts. If you have a car loan or home loan, ask your lender if they will impose prepayment penalties. If not, you should pay as much as you can while you still can. This will help decrease your balance and make things easier. Or you can opt for debt consolidation Check your savings. The next thing that you have to do is to check the level of your savings. This includes your emergency fund, retirement, and other saving goals. Since you no longer have to meet your credit card payment, you can use that freed money and add it to your savings. If you have other debt payments, you can split the money - half will be saved and the other half will go to your debts. Set a financial goal. If you do not have debt payments and your saving levels are okay, you can just set a financial goal. For the longest time, your goal may have been to meet your credit card payment each month. Now that you have accomplished that feat, you can set your eyes towards another financial goal. This can be a vacation, a new house, or a new car. You can use this goal as a reward - for being a great borrower. Revise your budget plan. Once you have identified where the extra money will go, you can now revise your budget plan. This is very important because it will keep you focused on your new goals - whether that is paying down debt, adding to your savings, or focusing on another goal. You can decide to put more allowance on certain categories in your budget to lessen the restriction that you placed on yourself while you were paying your credit cards. As you reach milestones in your finances, make sure you revisit your budget to see if it needs changing. Establish rules for future credit card use. Finally, you have to establish strict rules so you can continue using your credit card without falling into debt once more. The truth is, you do not have to give up using credit. You just have to learn how to be a smart credit card user. Not only that, you have to come up with guidelines that will identify when it is okay to use your card. Will you limit it to expensive purchases with zero interest rates? Or will you limit its use for grocery items only? It is up to you. Just make sure that you will follow the rules so you do not have to worry about it in the future.
Financial choices to help you own a credit card without incurring debtThe truth is, the use of credit cards is not that bad. It can be very convenient - as long as you know how to use it properly. It all boils down to the financial choices that you will make. If you make the right choices, you do not have to worry that it will ruin your finances. Here are the choices that you need to make in order to practice being a responsible credit card holder.
- Pay your credit card on time. Meeting the monthly deadline of your credit card payment is a must. Late payments will reflect badly on your credit report and can cause you to pay more. According to an article published on Forbes.com, the most common mistake that credit card owners make is missing a payment. Set up reminders so this will not happen to you.
- Avoid carrying a balance over to the next month. While it is okay to pay only the minimum amount on your credit card, this is not always practical. You will only pay more than what is really necessary because a finance charge will be added to your balance once it is carried over to the next billing cycle. Try to avoid this by paying your balance in full. This is one of the credit card rulesthat you need to follow in order to be a responsible owner.
- Do not rely on your credit card for emergencies. A cash emergency fund is the best way to prepare for unexpected expenses. Using your credit card may seem like you have unlimited funds but it is not worth paying the interest for. Save up for an emergency cash fund but have your credit card ready just in case it runs out - which can really happen if you happen to go through unfortunate times.