According to reports, Americans have 4.2 trillion dollars in credit card debt as of December 2019. Having too much credit card debt can have an adverse impact on your credit card score, which, in turn, would impact your creditworthiness. This could have an effect on your loan applications. Luckily, credit card debt can be managed and you can avoid these habits to come out of credit card debt.
- Taking on more debt: One of the best ways to get rid of credit card debt is to start living within your means. Setting up a budget and cutting back on things that are not that important should help. Think before you make a purchase, buy what you can afford and need. Hence, when considering how to avoid these habits to come out of credit card debt, living within your income and not using your card for additional debt should be at the top.
- Applying for new cards: Don’t take on any more new credit cards no matter how attractive the terms might seem. In fact, you should try to reduce the ones you have to a few that you use regularly. If you do need to apply for a credit card read and understand all documentation, including the fine print carefully.
- Ignoring your credit card statements: Ignoring your credit card statements is a habit that should be changed. Checking your statements regularly will help you spot any errors or frauds and also help you to analyze your spending patterns.
- Paying interest: When talking about how to avoid these poor habits to come out of credit card debt, avoiding interest should be emphasized. Avoiding interest by paying the balance due each month will help to boost your credit history, and this will have an impact on your credit score.
- Missing payments: Related to the point mentioned above is this one. Setting up reminders for automatic payments from your bank account will help you to avoid interest and pay your credit card bill on time. It would therefore, help to avoid these habits and come out of credit card debt.
- Using your credit card rather than your debit card: Your debit card is directly linked to your account and you should use it for daily expenses such as groceries. You should use your credit card if you are getting reward points, are able to pay off the balance every month, or you have a plan in place on how to pay back the amount when due. However, do remember to use your credit card every three to six months to keep them active, as dormant cards do get canceled by the credit card issuer.
According to a study by the Federal Reserve Board, 43% of families in the US are spending more than they earn. Avoid these habits to come out of credit card debt and to manage your finances properly.