How to Manage Your Credit Card Bills
Credit cards are east to mismanage; with money available at your fingertips, you can easily find yourself into overwhelming debt with these high-interest, easily-acquired financing options. If you’ve got credit card bills piling up, you’ll want to get them under control before they affect not only your monthly finances but also your credit score and your chances of acquiring credit in the future. Here’s how to better manage your credit card bills, so you don’t end up drowning in debt.
The first step to managing your credit cards is to work to discipline yourself when it comes to personal spending. This is, of course, easier said than done; but by following some these helpful tips, you can curb spending and get your finances back under control.
One good tip to remember is to not take your credit card with you if you’re just going out to get groceries or a few items. It can be incredibly easy to get pulled into the trap of impulse spending if you know that you’ve got a few thousand dollars available at your fingertips. Leave your card at home if you know you’re going somewhere that you often spend extra money at.
The less you expose yourself to possible impulse buys, the less likely you are to fall into the temptation. Avoid those stores you know you can’t resist. If you leave your card at home, you’re going to be less inclined to use that funding in the heat of the moment.
Set a Monthly Budget
A monthly budget can help streamline finances by identifying expenses, income, and the gaps between the two. You may just be surprised by what you find when you create a monthly budget. Those credit card bills might account for a large portion of your expenditure; costing you hundreds or even thousands per month.
Setting up a monthly budget can be as simple as sitting down with a bank statement, pen and paper, and creating an expense list. From there, identify all of your income sources. Now, add the two up, and subtract the expenses from your income. How much do you have leftover at the end of the month? What percentage of your expenses do your credit cards account for? 20%? 50%? If this number is higher than you’d like it to be, it’s time to put a cap on your credit card spending.
When you create your budget, create a “ceiling” for your variable expenses (expenses that change month-to-month, like credit cards). This ceiling will act as a hard limit for certain expenses. If you’re spending thousands per month on your credit cards, set a limit of just a few hundred dollars to start with. This will require discipline, but if you succeed, you’ll see the effects of such practices in the first month.
Financial advisors are an excellent resource for setting up a monthly budget. With expertise in the area of finance, these experts can offer advice on how to better allocate your income and minimize expenses. And you can find a reputable one almost anywhere in the world. For example, visit Careful Cents to compare the best financial advisors in San Antonio.
Choose a Card With Lower Interest Rates
Part of the cost of utilizing credit cards is the APR, or annual percentage rate. This interest rate can make your purchases even more costly. When you borrow money, you’re paying a percentage of what you borrow as the cost for borrowing that amount; and on your credit card statements, this amount is charged on a monthly basis.
Credit card APR’s will vary according to the card, provider, and your credit score and history as the borrower. Some credit cards can be as low as 10-15% APR, while others can reach as much as 35%. It’s important to consider the true cost of what you’re purchasing. Don’t forget about the interest rate. If your interest rate is too high, you can always apply for different cards with better rates. This should help you control your spending and minimize credit card expenses.
Improve Your Credit Score/History
The best way to get access to better credit card rates is to improve your credit score and payment history. If you have a history of late or defaulted payments, it’s time to address them by paying on time going forward. Late payments can be reported to the credit bureaus and can have a much bigger impact on your score than you may think.
This is where it’s important to not borrow more than you can reasonably afford to pay back. Any time you borrow money, you’re taking a risk, but borrowing too much drastically increases that risk. A good habit to get into is to only apply for a credit card if you can afford twice what the monthly minimum will be. This not only ensures you’ll pay your balances off quicker, but also that you’ll avoid late fees and you’ll have a buffer zone should a financial mishap occur and you can only afford a minimum payment.
Always Pay on Time
This cannot be stressed enough. One of the biggest factors in credit card debt is the late fees. Late fees can be as much as $50, adding even more to the amount you missed on your statement. If your minimum payment was $35, and you were late, you’ll now owe somewhere between $60 and $80 as a minimum. That’s not including the interest rate!
Always pay on time. Late payments can only serve to set you behind, both in terms of building your credit score and history, and your financial obligations.
Credit cards can be a great financial resource when managed properly. They can build your credit score and history, and grant you additional financial resources that you can tap into for emergencies or personal spending. Be sure to keep credit card spending on track to avoid joining the millions of Americans already in credit card debt. Remember to discipline yourself and your spending and avoid those places where you tend to impulse buy.