Credit Card Catastrophe?
In an ideal world, we would all be able to pay off our credit card(s) every month. We would build perfect credit and we would never owe anyone. Right?
Settling credit card debt is a noble goal, but here is some practical advice for the rest of us. First things first, consolidate! If you have more than one credit card, try to pay off the littlest balances first. If it looks like that may be a while out, look into transferring the balance to your credit card with the lowest interest rate. (Most banks are happy to give you a low interest rate for a balance transfer). Do what you need to, to make only one payment a month. It will un-clutter your desk, and help clear the fog in your brain.
Second. Lowest monthly credit card payments are not your friend! An evil ploy to pay back your creditors for the rest of your life, banks will set up your account so that your monthly payment and finance charges practically cancel each other out. If it is within your control, pay more than your minimum charge.
It’s recommended to have only one to two credit cards. The first is to build your credit and pay off the balance every month. The other is your rainy day fund; A card to turn to in case of a sudden, unplanned expense. The goal is to get as close to this as possible. Keep your goal in mind while paying off your expenses. As a rule of thumb, If you don’t have it, don’t spend it!
Use the system to your advantage. You are the customer, and if you are a good one, chances are the bank would rather keep you on and lower your interest rate than lose you to another institution. Reap the benefits. Get some free rewards. If you plan to use your credit card, add the rewards system to the now consolidated card to earn free gift cards, travel etc.
Remember spending fiends, there is nothing better than living within your means.
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