5 Tips On How To Avoid Growing Your Credit Card Debt

Credit card debt is one of the biggest hurdles to financial stability. Not only does it keep you from pursuing your life goals, but it also taints your credit score. If left unresolved for a long time, your credit card debt can affect your future financial endeavors negatively.

Minimizing Your Credit Card Debt: Is It Really Possible?

Right now, it may feel overwhelming to think about your current credit card balance. Understandably, it’s easy to feel helpless when your debt is particularly big, as it gives the impression that you’ll always be tied to it.

The good news is that an appropriate long-term plan is all it takes to prevent yourself from having bigger credit card debts. With effort and consistency, you can even eliminate it completely and earn your rightful ticket to financial freedom.

Are you ready to turn your life around and become financially responsible?  Listed below are five tips that can help you manage your debts successfully:

  • Assess Your Current Spending Habits

The best way to create a plan that will really help you face your debts is to learn what you’ve been spending on in the first place. Once your spending habits are revealed, it will become easier to reprioritize your expenses so you can stop your credit card debt from further increasing.

  • Use The Debt Avalanche And Debt Snowball Method

These two may be the simplest debt elimination methods that you can try. Simple doesn’t necessarily mean “easy” in this context, but if you apply the rules consistently enough, you’ll see a big difference.

Both the debt avalanche and debt snowball are similar in approach, but they just differ in priorities. You may refer to this list of debts:

  • Auto Loan: $10,000 with 4% interest
  • Credit Card Debt: $8,000 with 20% interest
  • Personal Loan: $5,000 with 8% interest

The debt snowball encourages you to pay the debt with the smallest amount first. This encourages you to continue the streak because it provides an early sense of victory.

With the debt snowball, you’ll pay off your debts in this order: personal loan, credit card, auto loan. Once you’ve paid off your auto loan, you add the amount that you used to pay to it on your next debt, and so on. Because you’re making bigger payments, you’ll be able to eliminate your debt quicker.

With the debt avalanche, the priorities are shifted to the interest rate. The order will, then, be: credit card, personal loan, auto loan. This is a more fitting strategy for the long-term because it tries to eliminate more debt by tackling the one with the biggest interest first.

  • Consolidate Your Debt

If you have debts in multiple credit cards, one of the best ways to handle them is to consolidate all your debts into one account. You can do this either by applying for a 0% balance transfer card or a personal loan.

It may seem counterintuitive to tackle debt by paying it off with another debt, but 0% balance transfer cards and personal loans have much lower interest rates compared to credit cards. Thus, once those loans manage to pay off your high-interest debts, you’ll have lower interests to worry about.

For instance, lendvia.com particularly specializes in providing loans for credit card debts. As such, they have loan coaches that can create tailored payment strategies for your situation.

  • Avoid The 30K Millionaire Lifestyle

The 30K millionaire lifestyle is the life of a social climber—someone who always lives beyond their means. Indeed, the 30K millionaire is a fitting name for these people because they’re mostly the ones who have a yearly salary of $30,000, yet they live as if they’re millionaires.

People incur huge credit card debts for various reasons. However, if you managed to get to this point because you were being a 30K millionaire, then, it’s time to reassess your priorities and work on eliminating your debt instead. This way, you’ll be on the path to real wealth.

  • Minimize The Use Of Credit Cards

Undeniably, credit card companies are doing a great job of marketing their products to people who are financially uninformed. This is how they earn, after all.

However, if you’re serious about achieving financial freedom, it’s best if you actively avoid using your credit cards altogether. Always choose cash transactions over credit. If you really have to use a credit card, make sure that you limit its use to essentials, like utilities or groceries.

Once you’ve managed to pay off your balance, you may choose to have your cards cancelled or lower their credit limit. By taking away their accessibility, you’ll have no choice but to spend only what you actually have.

Credit Cards Should Always Be Used Responsibly

The truth is that credit cards can be useful in many situations. However, in the wrong hands, they can cause financial burdens that are tough to get out of. At the end of the day, credit cards should simply be regarded as an added bonus to your financial methods, and not as a means of buying what you can’t actually pay for.

Speak Your Mind