Getting into credit card debt was your first mistake. Don’t compound your problems by continuing to make mistakes as you try to get rid of your credit card debt. Here are some common mistakes people make when they’re trying to get rid of your debt.
If used wisely a balance transfer credit card can help you get out of debt. On the other hand, if you’re not smart about it, it can put you in worse shape than you were before. Let me give you an example of how a balance transfer card can be bad for you.
You have $15,000 in credit card debt with one credit card at 15%. You then hear of a credit card with a 1 year introductory offer of zero percent interest so you jump on it and transfer your balance there. But did you know that this new card may have a 3% balance transfer fee? Now let’s assume that you didn’t plan out how long it would take you to pay off this debt. You figured you could afford to pay $5,000 a year so you’d be done in three years. Wrong. Sure the first year all $5,000 would go toward the debt. But what about year two and year three? Well your new interest rate is now 20%. Had you read the fine print you would know that. Now you have $10,000 in credit card debt left but at 20%. If you crunch the numbers you might have been better off sticking with your original credit card.
You get a credit card bill every month, so you should pay every month, right? Wrong again. You can make a payment to your credit card more than once a month. Did you know that you accrue interest charges every single day? So why would you wait a whole month to pay them? If you get paid every two weeks, make a payment to your credit card every two weeks. Get some extra money? Make an extra payment.
Store Credit Cards
It seems like every time you go into a department store we’re offered a credit card. Their offer is enticing: You can save 15% off all of your purchases today if you just sign up. Why would they want to be so nice and offer you free money like that? The answer is simple, it’s because they know they’re going to make it all back and more in the future. They think long term and are hoping you think short term. Don’t fall for it. Store credit cards carry very large interest rates, usually over 20%. Plus the store knows that once you have the card you’re more likely to spend more money there.
Don’t Listen To Them
Credit cards were not invented to make your life easier. They were invented to make the banks boat loads of money. You are not to trust what the credit card companies tell you. Here are some examples.
– Make the minimum payment. Don’t do it. Pay more than that. If you only pay the minimums it may take you more than a decade to pay off your debt.
– Cash advances. Your credit card will offer you cold hard cash. Just say no. They will charge you a very high interest rate on that cash. You don’t get cash from your credit card, you get it from your savings account.
– Use your credit limit. Your credit card has a credit limit of $10,000. Just because it’s that high doesn’t mean you should use it. Try to keep your credit utilization rate under 50%. If you’re using most of your allowable credit your credit score will drop.