Credit cards can be a blessing and a curse. They allow you to spend for something even without cash on hand; but in the long run, if you don’t monitor your expenses well, you end up paying more than what you originally spent. And if you don’t monitor your swiping sprees wisely, you could end up in credit card debt. I had seen this happen to several friends but I never thought it would happen to me.
Credit card debt is scary but it can be avoided and overcome.
After acquiring my first credit card, I had swiped it for a new cellphone and used it to pay for the cellphone purchases of my 3 friends too. In the same month, we had lost our jobs (as we worked in the same company). I had no savings to back me up for the next months and I had to spend my last pay check to look for another job. In the meantime, my credit card debt was getting larger and my friends didn’t have the capacity to help with the payments at the time. What was I to do?
If you are in the same situation, and especially if you are trying to pay off more than one credit card, here are some tips to keep you focused on overcoming your credit card debt.
Avoid creating more debt.
Needless to say, this is the first step you should take. Look at your current spending and find out where you can reduce your expenses. Avoid using your credit card for necessary expenses (e.g., food, utilities, etc.), use cash as much as possible.
Leave your credit card at home so you don’t succumb to the temptation of whipping it out every time you are strapped for cash. If you just can’t help yourself, resort to some extreme measures. Some people actually freeze their credit cards, in the refrigerator, so they don’t have the convenience of taking it out.
Also, when paying your credit cards, make sure to do so on or before the due date so you don’t get additional late payment fees added to your outstanding balance.
Be a smart and focused payer.
Educate yourself about your credit cards and pay your credit cards strategically. Talk to your credit card companies and find out which credit card has the highest interest rate and total outstanding balance.
In general, you should pay off the credit card with the biggest balance or the biggest interest rate first and aim to pay that off as soon as possible. At the same time, you should still continue to pay for the other credit cards that you have. As soon as you’re finished with the first credit card, tackle the second one next. Repeat with the other credit cards remaining.
Some people choose to pay the credit card with the highest interest rate first even if they don’t have the biggest outstanding balance. Others start with the credit card with the biggest outstanding balance first and still others start with the credit card with the smallest outstanding balance. Choose the payment method that you are most comfortable with in your current financial situation.
Find out which credit card companies you can request payment arrangements with. Credit card companies offer payment plans where you can pay a fixed amount every month until you pay off the full amount. This means that you don’t incur more debt from the monthly interest rate on top of your actual balance. Take note that the end goal of this payment arrangement is to eventually close your credit card account once you are fully paid. That’s one less credit card to worry about.
Close the gap with each payment.
As you pay for any of your credit cards, try to pay more than the minimum monthly amount required. Even if you have already made payment arrangements with your credit card company, paying more than the required monthly minimum will help you reach your payment goals much faster.
If you are really on a tight budget, you don’t need to do this with each payment. But each time you have some extra cash on hand, funnel it to paying off more than the minimum amount for your credit card instead. This means that you also avoid spending the money on something else. That’s hitting 2 birds with one stone.
Don’t close a credit card account that is not yet fully paid.
If you are already thinking of doing this, stop immediately. Closing a credit card account that you have not fully paid will have harmful effects to you and your future.
The immediate effect is of course that your credit card company’s collection agency will be hounding you with calls, letters and emails with threats of a court case. Sure, you might be able to endure it but your unpaid credit card debt may haunt you in the future too.
Your unpaid credit card debt will reflect badly on your credit history. If you do get in the situation where you need to take out a personal loan from a bank, they will take a look at your payment history with your previous loans and an unpaid credit card is definitely a red flag on your record. You may not be able to get a personal loan from any bank because of your unpaid credit card.
Also, when looking for employment, some companies do check their applicant’s background including their credit card history. Your shady credit card history may be standing in the way of your dream job.
Endure and learn your lessons.
One of the obvious ways for you to pay off your credit card debt faster is to create more income. If you are unemployed at the moment or if you are already employed, you can use your talents to help other people and earn.
List down the things that you are good at and the things that you love to do or would love to do. Be honest with yourself on this or seek the help of friends. Doing this can help you explore hidden talents or a passion that you have been putting on the back burner for a while.
Can you play an instrument or are you good at drawing? Offer to teach for a fee! Do you like to teach children? Be a tutor! Have you always wanted to share your passion for gardening with others? Now is your time to start sharing your knowledge and start earning! There are many other ways to create income or additional income. You just need to have a clear focus on your goals, be open-minded to new ideas and be brave enough to grab the opportunity.
Finally, don’t fret about the amount of your debt. By educating yourself and keeping your focus on your goal, you will eventually overcome it. Just don’t forget the lessons you learned along the journey so you can be a wiser spender in the future.