Credit cards can be a godsend for those times when you’re strapped for cash. Unfortunately, credit cards often tend to do more harm than good even in the best of times. This is because, credit purchases tend to diminish the value of each purchase made. Instead of having the funds deducted immediately, you have the option of paying 30 days later.
Thus, this encourages us to spend more than we actually can afford which leads to an accumulation of large credit card debt. Coupled with the fact that banks often charge extortionate interest rates on existing debt and you have a recipe for disaster.
As of 2018, households across the United States recorded rising household debts amounting to nearly $13.54 trillion. Out of this, credit card debt made up $26 billion which is nearly 20% of the total debt owed by Americans.
Even professional athletes, that many consider to be wealthy, get caught on this problem. It is quite easy for football players to go from top NFL wagers on sportsbooks, to being broke and ending up with piles of debts. One example is former Dallas Cowboys and Philadelphia Eagles wide receiver Terrell Owens, who lost over $80 million he earned during his career, due to poor investments, trusting the wrong people and overspending.
With such frightening numbers, perhaps it’s time we took a long hard look at our credit cards. To give you a hand, we’ve prepared this guide which outlines 5 easy ways for you to manage your credit card debt.
1. Recognize the issue
From avoiding the bank’s calls to throwing away letters from the bank, it can be easy to pretend that you don’t have a mountain of credit card debt. But the thing is, however much you try to avoid it, your debt will still always be there, accumulating interest and growing steadily.
Hence, the best thing you can do is to recognize that your debt levels have grown out of control and that the time for action has come. By facing up to the problem you’ll be able to prepare yourself mentally for the journey ahead.
Running away from the problem will only serve to compound the issue and can even lead to health problems caused by excessive stress levels.
2. Stop using your credit card
Having identified the problem, it’s now time for you to limit the damage that is being caused. This is easily done by cutting off your credit cards entirely. By doing so, you’ll immediately prevent any additional debt from being incurred on these cards.
While this may seem to be impossible to some, you can in fact very easily live on zero credit. From saying goodbye to expensive dinners out on the town to re evaluating certain aspects of your lifestyle, the process of cutting off your credit cards may be difficult initially. However, on the long-term you’ll notice that your credit card debts have fallen significantly.
Doing this also makes it much easier for you to begin chipping away at your existing credit card debt.
3. Start paying off debt
Credit companies and banks have a devious way of doing business. They allow credit card holders to make minimum payments monthly while they charge absolutely ludicrous interest on outstanding debt.
This lulls holders into a false sense of security and encourages them to live on credit whilst maintaining a large amount of outstanding debt. Eventually, the debt balloons to such a level where the minimum payments are only sufficient to cover the interest charged and thus trapping one into a cycle of perpetual debt.
If you’ve been paying only the minimum amount each month, you need to stop. Immediately. Instead, make sure that your monthly repayments are above that of the minimum amount. By making above minimum payments, you’ll be able to pay off interest while also reducing the principal amount owed.
Besides this, you should also consider taking on freelance work to earn some extra cash to help you pay off your credit card debt. With the extra cash flowing in, you can begin to make larger repayments. This speed up the repayment process while also helping you pay less interest.
While there are different types of consumer and shopping credit cards that have their own set of benefits, poor financial management and planning means that they often do more harm than good. Instead, work towards slashing your credit card debt and living a debt free life.
Author: Benjamin Lee