What is a Credit Card?
Credit card is one of the most used accounts by consumers. Credit cards are easy to use but are also the fastest to collect credit. In fact, approximately 71% of credit card users only pay the entire balance each month on their credit card, meaning they are paying zero interest each month. And the remaining users who chose to hold their balances and only pay for minimum payments will pay for interest. Which can sometimes cause stuck up credit card debt.
With this practice, consumers tend to accumulate interests and huge balances that cause them to pay thousands of dollars annually. Most consumers, if not all, have two or more credit cards and have this kind of practice. And this will lead to consumers needing credit card debt help.
Credit card repair companies are all around the corner if you think you can’t handle fixing on your own.
If you are still new to credit cards and don’t know how to utilize them, let’s list down tips on avoiding credit card debt as a first-time credit card user.
1. Setup a budget
– set up a budget for necessities, savings and wants. It will be the first step in using your credit card wisely. Having a credit card does not mean you can swipe endlessly without checking your budget. Remember, spend within your means.
2. Keep track of your purchases
– keep track of your purchases so you would know when you have to compromise your spending. It is essential so you can stay within your budget.
3. Setup automatic payments
– setting up automatic payments will help you not miss your other credits. Schedule each payment ahead of your deadline to avoid late payments. It will also help you increase your credit score.
4. If possible, use only 30% of your credit limit.
– the more you spend closer to your credit limit, the lower your credit score can get. Using only 30% of your credit limit is advisable to boost your score.
5. Pay your balance in full each month
– paying your balance in full each month can save you from paying interest. Holding your balance and only paying for the minimum will have you pay high interest in the future.
What are the benefits of using credit cards?
1. It lets you borrow money instantly to make purchases
– credit cards don’t need cash for every purchase. You need to present your credit card, and you can make the purchase on the spot.
2. Helps you establish a credit history and earn a good credit score
– long credit history is a plus whenever you need financial assistance like loans. And if you are paying on time and your balances are in full, you can boost your credit score.
3. Convenient payment method.
– if you want to purchase something on the internet or pay for the food you want to be delivered, it will be more convenient to pay via credit card than other payment methods.
If there are benefits to using credit cards, there are also risks that come with them.
1. More debts than you can handle
– If you are not responsible enough to handle your credit cards, it will only cost you more debts, and before you know it, you’re getting overwhelmed by the stuck-up credit card debts and unable to pay any of them in whole or not at all.
2. Damages your credit score
– credit cards, if handled well, can boost your credit score. However, it’s another discussion if you fail to meet your payments. It can damage your credit score big time.
3. Cost much more than some other forms of credit.
– when interest charges are incurred, credit cards tend to cost you more than any other accounts like lines of credit.
Credit fix companies are always available when you need a helping hand.
What is the best way to handle credit card debt?
As mentioned earlier, paying in total will save you interest. But misfortune happens sometimes, and what to do when you get overwhelmed by credit card debts?
1. Debt consolidation
– debt consolidation is combining all your debts into one and paying for a lower interest rate than what you are currently paying. It will help you get out of credit cards faster. It is one of the best options you can get if you need help with your debts.
2. Get professional credit counselling
A credit counsellor will teach you how to manage your finances and help you get out of debt if you follow and stick with their lessons. They can help you control your debts and give you a solid foundation for your financial planning in the future.
3. File for bankruptcy
– filing for bankruptcy should be the least of your options. A bankruptcy can stay up to ten years on your credit report and decrease your credit score by up to 200 points. Bankruptcy should only be an option if you run out of options to pay your debts. But you must avoid filing for bankruptcy at any cost.
Credit cards are friendly and convenient if maintained well, and you are disciplined enough on your expenses. Self-discipline and being responsible is the key to financial stability. If you always live beyond your means, you won’t be able to catch up on your own lifestyle.
A little sacrifice won’t hurt if it means financial stability. You can have a lavish life once you stabilize your finances. But as long as you admit that you can’t afford a lifestyle, compromise. It won’t hurt a little compromise on things you don’t need.
Hope this credit repair blog helps you on your journey to financial stability.