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You've done a great job in getting your credit cards but like a lot of people, you may find yourself in a bit over your head because life has a way of throwing obstacles in your path and those obstacles generally cost money. It is a good idea to have a low interest and no fee credit card for emergencies.
Sudden loss of a job and then needing to make car repairs can put a real dent in your bank account. The way people get in over their heads is when they start living off their credit cards. If you're buying your groceries or paying your bills using your personal credit cards, it is time to look at your household finances and create a budget that you can live on.
Rules To Live By
A good rule of thumb for drawing the line about when to use your credit cards is never use your cards for anything you can pay cash for.
Credit card companies basically don't want you to pay your balance in full every month. They prefer that you pay a minimum payment every month and keep the interest rolling in on your account.
There are some companies that charge their cardholders yearly fees, interest on their balance and a fee for managing their accounts. If you have one of these types of credit cards, it's time to look at paying off your credit cards and getting a budget that you can live on together that will allow you to pay off your credit card debt.
Let's assume that your payment is set up to pay back the very minimum balance each month. The minimum balance is around 2% each month. This means that the bulk of your payment is going towards payment on the interest. This is why it seems so long to pay off the debt. For example, if you purchased goods that originally cost $2000, at an 18% interest rate, you'll end up paying back over $7000. That should motivate you to pay off your credit card debt!
What You Can Do
You can jump off the merry-go-round any time you want. Don't get any further in debt than you already are. Make an honest budget. Calculate your bring home pay and deduct your true amounts you average for bills and utilities. Then cut corners where you can.
Ways To Trim The Fat Out Of Your Budget
* Take your lunch to work. * Stop watching the Home Shopping Network and most of all....... * leave all but one of your credit cards home!
This will eliminate spur of the moment shopping.
Staying Motivated
Calculate how much you owe on your credit cards. Pay off the cards with lowest balances first and split that money you were using to make those payments among your other cards and give the largest payments to the next lowest credit card balance. This will allow you to see results more quickly and keep you motivated in paying off your credit card debt.
It's not a bad idea to keep in your possession the budget that you created. This allows you to be objective about frivolous purchases you want to make. Use your savings if you can to pay down debt. The most that the average savings account pays is 4.5% interest on the balance.
Why keep money in that account if you're paying on an account charging you 17-18% interest?
Another direction to take if you find you are so in debt you cannot meet your monthly obligations is finding a good credit counseling service or debt consolidation service. These services help you negotiate a debt down to a workable solution. Be careful in this area as well though, you may want to consider that the money spent here can also be spent on paying off existing debt, read the fine print to see if there are fees and if you are already past due on your credit cards, your cards will continue to be reported to the credit bureaus as "past due" until the balance is paid in full.
It's going to take some discipline to pay off all of your credit card bills but if you work hard enough at it and have a commitment to stay with your budget, there's light at the end of the tunnel.
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