There’s a chance we’ve all gone on a spending rampage or had an emergency and had to whip out the plastic. Credit cards have become the “go-to” payment method overtime for the average U.S. consumer. In a 2016 survey done by payment processor TSYS, about 40% of the people surveyed chose credit cards as their preferred method of payment. That’s almost half!
Many people choose to pay with credit cards for a variety of reasons. Among the top reasons are the “buy now, pay later” mentality, gathering miles and points, or the simple fact credit cards are just much simpler than carrying cash. But what happens when we don’t use credit responsibly and accrue a huge debt? How do we climb that steep hill that is paying off credit card debt?
With great power comes great responsibility…
As G.I. Joe said, “knowing is half the battle” (one of my favorite cartoons growing up). This saying also rings true to credit cards. Knowing the limitations and best practices can set you up for success when it comes to credit. Just because you have a high credit limit does not mean you have to spend all of it. Generally, best practice is using 30% or less than your total credit limit at a time. This ensures your credit usage will not hurt your FICO score.
Tackle High Interest Cards First
If you have debt spread out across multiple cards, try to devise a plan to pay off the one with the highest interest rate first. This will ensure you are not just paying interest month after month. Spread your payments across the board with the highest chunk of your money going to the card with the highest interest rate.
Pay on time, even if it is the minimum
The worst thing you can do is to pay late. This will damage your payment history, negatively affect your credit score. In addition, you will incur more debt due to high interest rates and late fees. Even if you are making the minimum payment, make sure you make the payment and make other payments throughout the month when you have more money.
Adjust your lifestyle to prioritize paying off your debt
You have to be willing to have self-discipline and stick to the plan if you want to pay off credit card debt. This may mean adjusting your lifestyle to find ways to save on somethings to accelerate your payoff schedule. If you usually enjoy gourmet coffee at your local coffee shop you may have to just make coffee at home for a while. Every little penny saved will get you closer to a debt free life. It will suck for a while but in the end, you, your wallet, and your credit score will thank you for it.