Credit cards: one of the most advantageous, yet detrimental, assets to your financial status. If used correctly, credit cards can boost your credit score, enabling you to buy a house and a car, as well as several other necessities. However, credit cards can also become destructive. Low credit scores and debt are two of the most commonly seen affects of poor credit card management. If you’re struggling to keep your credit card usage under control, or just want some advice on future management of your cards, here are a few simple steps you can take to help you in the right direction.
Put Them Away
My first point is to take all of your credit cards out of your wallet. Simple, right? But honestly, this is the best place to start. Whether you’re buying groceries or window shopping at the mall, you will be forcing yourself to keep a tighter reign on your finances. With credit cards, it is easy to believe that you have unlimited money available. And for the time being, you do. It isn’t until the next month that you’re hit with the payments and the accrued interest.
When you get the credit card out of your reach, you’ll find that you monitor your bank account more closely and keep a lower balance on your credit cards. It’s amazing how much money you will save by not throwing hundreds of dollars at your credit cards every month to try to pay them off.
I realized that it became a never-ending cycle. While you do put extra money toward your payments every month, it never seemed to reach a zero balance. If you put away your cards and reach a zero balance, you may just save yourself a couple hundred each month.
If you have decent to good credit, you shouldn’t have a hard time getting a 0% interest credit card. While this alluring interest rate doesn’t last indefinitely, you can usually find credit cards offering 0% for 15-18 months, making this a great way to pay for large purchases. But wait! Doesn’t that contradict the last point? Let me explain what I mean.
Sometimes you need to make a large purchase; one that would require you to clean out your savings account. Or you may not even have enough money to make this large purchase. Emptying your savings account may not be a good option. The money you’ve saved is important for emergencies, future retirement, and so forth. No matter who you are, it’s important to build up your savings first and foremost. So back to my explanation…. Sometimes the company you are making the large purchase through does not offer a payment plan, and especially not without interest. Therefore, a better option may be to get a 0% credit card.
Be sure that you can handle a credit check and that you can afford these new payments you will be setting up for yourself. Now, take however much is on the credit card and divide it by the number of months you have until the 0% expires. This will be your monthly payment amount, not the minimum amount due on the credit card. It is important to keep to your new payment plan so that you will have the card paid off before you are forced to pay interest. And if you find you can pay off the card sooner, that’s even better! Just be sure to keep that card put away and do not put any additional charges on the card.
Have you ever had a monthly bill that refuses to set up your account unless you permit automatic withdrawals/payments. While this can be a little annoying, it’s not necessarily a bad thing. If you have some of these bills, try putting them on a credit card. And once again, don’t get confused here. I’m not saying to run up your card every month. But what I am saying is that if you have a few small bills that need to automatically pull money, your credit card is a good option.
Do not treat this as a credit card charge. Continue to see these automatic payments as the monthly bills they are and pay them off when they pop up. This will keep your card at the desired zero balance and your bills under control. Another great benefit to this is that it helps your credit score. When you make small “purchases” and then pay them off, it builds good credit as well as makes your credit card provider happy.
As you’ve probably noticed, each of these steps so far work together. When your credit cards are put away, the only thing that can be charged to them are the bills we mentioned in the previous two points. And, hopefully, you will assess your finances before you take on any more bills or large purchases. The ultimate goal is to live off of your checking account, not your savings and forms of debt.
The last point is more of a reminder or a tip: pick a good credit card to start with. One that comes from a reputable company that you will be able to work well with easily. Also, read through as much of the card’s information as you can before applying. Look over the interest rates to learn how long the 0% lasts, and what the interest will be if you decide to keep the card after the 0% has expired.
Once you have determined that you found a good company and a good card, stick with it. It you change out credit cards too often, you can hurt your credit score. Sticking with a card also allows you to build a reputation with that company. Eventually, they will offer you better incentives and reasonable offers.
While none of these steps are profound or earth-shattering, they are simple to understand and easy to implement. Reigning in your credit card charges is one of the most helpful ways to bring your debt under control. If you have credit card debt, begin using these steps to properly manage your credit cards and to reach your financial goals.