Is it possible for you to keep a low credit balance?
To be honest, it will be challenging. After all, we live in a society wherein the use of credit is practiced excessively. In fact, we put a lot of importance on the use of credit that financial institutions have made credit scores part of the requirements to access financial products.
We use credit to buy just about anything. It’s convenient and it gives us a sense of purchasing power. Of course, that power is not entirely ours because technically, it’s the creditor’s money. We have to pay it back and it’s done with interest. So there’s also a bit of danger in using credit.
But that danger is not enough to deter us from using credit. Because if we’re honest about it, the use of credit can be very beneficial. You just have to learn how to use it properly. And you need to keep it from destroying your financial future. The best way to do that is by keeping your credit balance low.
3 tips to maintain a low credit balance
While keeping a low credit balance is hard, it’s not really impossible. And it actually gets easier once you develop the right financial habits that will help you manage your credit wisely.
But to get you started, here are three tips that you can follow to keep your credit balance as low as possible.
First of all, you have to get used to prioritizing your savings. Whenever you get your income, you have to take away your savings first. Treat it like a bill that you have to pay. When you think of your savings as a bill, you trick your mind into making sure it’s met. And whatever is left of your finances, that is all that you will spend.
If you think that there’s no way that you can save because of your limited situation, think again. When the coronavirus happened, you’d think that people would not be saving money. But reports revealed that during the height of the pandemic and before the recession, the saving rate was at an all-time high. The saving rate hit a record of 33%. Apparently, people got scared of the financial crisis and the increasing unemployment rate. It forced them to save up what little money they have. This teaches us that we have what it takes to save more. We just have to be really determined about it.
And what good with your savings do to help keep a low credit balance? It will keep you from using credit especially during times of an emergency.
Spend below your means
Another thing that can help you maintain a lower credit balance is by spending below your means. You see, debt is simply a result of overspending. If a purchase cannot be met by your monthly income, you use debt to pay for it. But if you keep your spending low, you don’t have to overspend and use debt for anything.
You just have to change your spending habits to ensure that you will never go beyond your budget. Take a look at what happened during the pandemic. People changed how they spent their money. They were more cautious and made more trips to the dollar stores to save money on their usual expenses. If you want to keep a low credit balance, you can do the same. There’s no excuse to low lower your spending. It’s just a matter of being determined enough to make the changes happen.
Use credit with a purpose
Finally, you have to learn how to use credit with a purpose. As mentioned earlier, it is the norm to use credit in our society. In fact, it’s encouraged because it helps boost consumer spending. This is a huge deal because 70% of our economy is influenced by how consumers spend.
You can’t deny that credit does have it’s benefits. But we have to learn how to use it properly. If it will not help improve your financial position, don’t use credit. If you really have to use one, make sure you are ready with a repayment plan. Unless you have an idea of how you will pay it off, don’t borrow money.
The more conscious you are in using credit, the less likely you will borrow unnecessarily.
Reasons to keep a low credit balance
Why is it sure a big deal to keep a low credit balance? There are three reasons why you should make an effort to change your credit habits.
To have a better credit score
The first reason involves your credit score. If you want to have access to the best terms for various financial products, you have to improve your credit score. And once you already have a good one, make sure you maintain it. Keep on using credit but make sure you have full control over it. Pay your dues on time and do not borrow more than 30% of your credit limit. These are the simple rules that you can easily follow if you keep your credit balance low.
To protect future income
When you have a low credit balance, you will also protect your future income. What you have to realize is that when you use credit, you are compromising your future income because that is what you will use for payments. If you want to secure it, make sure you don’t borrow a lot of money. Keep it low so you can enjoy the income that you will earn in the future. Don’t abuse your use of credit so it will not compromise the quality of life that your future self will lead.
To keep debt stress at bay
The last reason to keep a low credit balance is to keep debt stress from ruining your present life. Debt has the ability to bring a lot of problems. If you have to deal with credit problems, it will make you worry – especially if you are in the midst of a financial crisis. Your limited resources might not be enough to pay for all your debts. That can cause you to feel anxiety and stress. To avoid this, make sure your credit balance is low and manageable.