Credit Card Debt
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Credit Card Debt
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The Lasting Effects of Credit Card Debt By Allison Henderson
Ø How to avoid getting sucked into the credit card lifestyle: 1. Analyze your income and expenses through the use of a budget 2. The budget’s information should inform you of how much spending you will be able to do off of your current income, after bills are paid. 3. It is okay to have a few (1-2) credit cards for safety purposes, in case you have an emergency purchase you need to take care of when cash is not readily available. 4. Make sure that when you use your card to make a purchase, that you have an inkling of some income that can pay the majority (if not all) of the balance off when the bill comes due. This insures you not paying extraordinary interest rates which make your expenses even higher than before. Ø Alternatives to using the plastic: 1. Don’t just swipe the card because it is convenient and easy. 2. Write a check, so that you know that you can only write it for the amount of your balance in your checking account. Thus avoiding interest rates on unpaid balances. 3. If you have a job where tips are involved, ration your tips and save them up for a specific amount of time, after which you can spend them on something you have been thinking of. Just do not consider those tips as part of your income ahead of time when planning a budget, because they cannot be used as income to pay bills because they are not going to be available if you are spending them for personal purposes. Ø Certain types of credit card advantages to look for: 1. No annual fee! 2. A low interest rate on balances carried forward into subsequent periods (less than 15% is optimal). 3. An introductory low APR (annual percentage rate) which may even be 0%. 4. Delayed payment options (ex: buy now, and don’t pay the bill for 6 months). 5. Transfer balance options so you can transfer other higher interest rate card balances to a lower rate card. (Discover is one card with this option). Ø Your credit status: 1. Every time you apply for a credit card at any store or for any company (ex: Mastercard, Visa, etc), your credit history is scanned and assessed. 2. Try not to inquire at all about your current credit status unless you need to for some legal/personal reason. Each time you inquire, it is noted in your credit report. 3. Do not accept the credit application at every department store you shop at. It is best to choose one or two stores that you frequent the most, and apply there. The more cards you have, the more charging you will do! Ø Manage your bills before they come: 1. Do not wait for the credit card bill to come to know what you will owe. Try to keep an envelope somewhere handy so you can accumulate your receipts for each purchase. Then, sit down at some point and add up those purchases to give yourself a rough estimate as to what you have accrued on each card. 2. Always make sure you store your incoming bills in a noticeable and organized spot. You do not want to be behind on bills, so organization is key! |
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