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3 Reasons Why Credit Card Debt Is The Most Dangerous Debt

February 17, 2021 By editor

The most dangerous debt is credit card debt. If you’ve ever been deep in credit card debt, you know what this means.

When used properly, credit cards can help make your finances secure. But if abused, these cards can lead to the destruction of your financial position. It can even rob you of everything that you built so far. This is why you need to be careful when you use your credit cards for purchases.

Why not just remove it entirely? You can’t. Despite the danger, this card does have its benefits. This is the reason why people are encouraged to get credit card advice instead. Because of the way our society is built, nobody’s encouraged to eliminate the use of credit cards. There’s too much convenience to be given up. You’ll also lose some financial opportunities if you don’t own one.

This is why although it’s the most dangerous debt, a lot of people still use their credit cards. So instead of avoiding it, you just have to learn how to use it properly. That way, you can still enjoy the benefits of using your credit cards for your usual purchases.

What makes credit card debt a dangerous debt?

Part of learning how to use your credit cards properly is to keep in mind how dangerous it really is. This is not to scare you. It’s more to keep you cautious of the way you use it. When you understand how something can destroy your finances, you will never be reckless with it. So if you really want to learn how to become smarter with your credit use, remember the reasons why credit cards can lead you to have the most dangerous debt.

Source of stress

According to one survey, 23% of the respondents admitted that paying off credit card debts made them feel stressed.

This is not really surprising. After all, when you have credit card debts, the creditor will keep sending you a monthly bill. It will state the amount that you still owe. It’s a constant reminder of what you need to pay.

With the regular reminder of your debt, it’s natural for you to feel anxious about it. The longer it takes for you to pay it off, the more it’ll cost you. That’s just how credit card debts work. Not only that, but you’ll constantly feel restricted in the way you spend your money. You won’t be able to enjoy it because you know that you have other payment obligations. It’s enough to keep you awake at night.

And guess what, the stress that you’ll feel won’t be the only thing you have to worry about. Constantly being in stress-mode will lead to health issues – both physically and mentally. So if you keep yourself in debt, it won’t be long before the stress you feel will manifest in your health.

High-interest charges

Another reason why credit card debts are considered the most dangerous debt is because of the high-interest rates. It can quickly make your balance rise significantly. How does that happen?

When you fail to pay the full balance of your credit cards, the amount carried over to the next billing cycle will trigger the finance charge. This charge is calculated using the credit card’s interest rate and the balance carried over. The higher these factors are, the higher the finance charge. Imagine if you can’t pay your dues each month. This finance charge will keep on increasing your credit card debt. When it reaches the credit limit, there’ll be more fees and charges added to your balance. And you’ll no longer be able to keep up with the monthly payments.

Minimum payment trap

If you want to make your credit card debt problems worse, stick to the minimum payment requirement. The minimum payment is a feature of credit cards wherein you can pay only a portion of your balance and it’ll be considered a qualified payment. That means you won’t be charged for late payment feed, or whatever is applicable.

While this seems like a good feature, it will keep you in debt for a long time. The finance charge will keep adding to your debt. You’ll end up paying a huge amount of money towards the interest rate. This is why most people are encouraged to pay more than the minimum payment requirement. If not, this dangerous debt will grow to cripple your finances – and possibly even your financial future.

Why we keep borrowing this dangerous debt

According to one survey, 120 million people have credit card debt. If this is the case, why do we keep on using it?

The truth is, using credit cards for purchases has several benefits. It gives your purchases an extra layer of protection. If it gets stolen, it won’t be like losing cash. As long as you alert your credit card company in time, they can freeze your account. That way, the person who has your card won’t be able to use it. The act won’t really damage your finances in any way. If the same thing happened to your cash, it’ll be gone forever.

This is only one of the ways that credit cards will benefit you. Here are three other reasons why we risk borrowing this dangerous debt.

Convenience

Without a doubt, having a credit card is very convenient. You don’t have to bring a lot of cash with you. Just bring your credit card and you can make purchases.

This is helpful when you are traveling. There’s no need to exchange your money for the local currency. If you can use your credit card, that’ll suffice. There are also other transactions that’ll benefit from this. Like if you want to rent a car, you’ll need your credit card. Checking-in a hotel will also require your card.

Let’s not forget about online shopping! It’s easier to use credit cards to make online purchases because it will protect you from scammers. This is the main difference between this card and debit cards.

Rewards

Another reason why it’s acceptable to use this dangerous debt is because of the rewards. It’s a perk that credit card companies set up so people are encouraged to use their credit cards.

For instance, when you have a travel rewards card, you get to earn miles every time you use it. Once this accumulates, you can use it to travel for free.

Credit card companies offer other perks like freebies, special discounts, cash-back rewards, etc. As long as you’re buying things that you would have bought anyway, there’s no harm using your card for the rewards. Just make sure you can pay it back in full so you don’t incur finance charges.

Purchasing power

Finally, credit cards give you a certain level of purchasing power. Admittedly, this is its feature that makes it easy to abuse. But if you can manage your credit use properly, it won’t pose a threat to your finances.

So how can this feature benefit you?

One example is its ability to get you out of tight spots. Like, if you’re in the midst of an emergency, you can rely on your credit card for additional financial aid. Of course, you’ll still need to save up for your emergency fund. But it’s nice to know that once that runs out, you still have another option to fall back on.

Strategies That’ll Maximize The Financial Gains You’ll Get This Year

February 14, 2021 By editor

What financial gains are you aiming for this year? After everything that happened in 2020, it’s time for you to focus on your financial recovery. With more than 2 out of 3 Americans experiencing a financial setback last year, it’s evident that the whole country has a lot of recovering to do.

With the pandemic and recession happening one after the other, even the most prepared household struggled financially. The pandemic forced a lot of businesses to close. Without the usual revenues, companies started laying off their employees. Without a job, people struggled just to survive the recession as it came to full swing.

Even those who had emergency funds probably depleted it already. Or what was once manageable debts are already worse than before. Imagine what happened to the people who weren’t prepared. It would have been very difficult for them to financially meet their needs.

While it will be an uphill battle from hereon, it’s not yet over. If you’re still fighting to survive, that means you still have a chance. It’s time to be more aggressive in improving your financial situation. Because it may not be as difficult as you think. You just have to be really determined to do it. And if you can figure out the right strategy that’ll help you maximize your financial gains, you’ll be in a better position than when you started last year.

Strategies that’ll help you achieve financial gains this year

No matter what you’re currently going through right now, you need to get your mindset in the right position. Because it doesn’t matter how bad things were in 2020. There’s nowhere to go but up. And you’ll recover faster if you have the right mindset to get you through the journey.

So stop looking around you and noticing only what you lost. Instead, focus on what you still have. Concentrate on what you can control so you can improve your finances. With this perspective, it’ll be easier for you to find opportunities that will lead to a lot of financial gains this year. You can recognize the right strategies that’ll maximize the improvement you can get for your personal finances.

When you use the right strategies, you can finally improve your personal financial health.

Let’s look at the strategies that can help you maximize your financial gains this year?

Focus on increasing your income

There’s no gain if you don’t take the time to increase your income. While smart spending is the key to avoid debt, earning more is the best way to increase your net worth.

But you have to remember, it’s not about working long hours. It’s more of learning how to work smarter. There are different ways to earn more money without making yourself feel burnt out. One of these is a passive income. This is a type of income that you only have to work on once and then it’ll keep earning you money. At the very least, it will only require minimal effort on your part to get it going.

An example of this is converting a part of your home and having someone else rent it out. You can earn extra from the lease money – maybe use it to help pay for the mortgage of your house.

Find a way to increase your income and make sure it’s something that you can rely on for a very long time.

Spring clean your bills

Have you thought about spring cleaning your finances? This involves a thorough cleaning of your house. The act will help make your home a healthier place to live in. It’ll also help lessen the stress and depression that you feel.

What some people don’t know is that the concept of spring cleaning can also be applied to your finances. How? You can take a look at all your bills and see which of them needs to go. There may be expenses there that you don’t really need. Even the little expenses matter if you really want to get a lot of financial gains this year. And you’re not alone in this endeavor. According to reports, 33% of survey respondents want to remove unnecessary bills. If your current finances went through a huge change in 2020 like you lost a job or depleted your emergency funds, this will help you recover. The savings you’ll get from eliminating these bills can be used to rebuild your emergency fund or help you make ends meet.

Pay off your debts

Finally, you’ll get huge financial gains if you pay off your debts. These debts eat up a big part of your income. Not to mention the amount you waste every time you have to pay off the interest rate. The rule with paying off debts is the faster you can get rid of it, the more you’ll save on your debt payments.

The key to paying off your debts faster is to use a debt relief program. There are several options to choose from and all of them are quite effective. But it’s important for you to choose the right option so you can maximize the savings as you pay off your debts faster. When making a choice, ensure that you’re considering your specific financial situation. Choose the debt solution that you can afford and will get you closer to your other financial goals after you’ve achieved debt freedom.

Mistakes that can compromise your financial gains

If you really want to maximize your financial gains this year, you shouldn’t focus on the strategies that’ll help you achieve it. You should also learn the mistakes that can compromise it. If you can get rid of these habits, you should be able to strengthen whatever you gained this year.

What are some of the ways that you can compromise your financial recovery?

Using credit recklessly

Debt is not bad. But the way we use debt is the main reason why it becomes a problem. Let’s face it, debt can be beneficial. It can help us make important purchases that would have taken forever to save up for. Like using a mortgage to buy a house or a car loan to buy a fuel-efficient car. These two purchases can increase your net worth and lower your monthly expenses.

As you can see, there’s no need to completely eliminate debt from your life. But you have to make sure that you will continue to use it, you have to become a better credit user first.

Not saving for an emergency fund

You’ll also compromise your financial gains if you fail to save up for an emergency fund. It doesn’t matter if you’re not using debt. Without any savings, you can easily find yourself deep in debt. All it takes is one emergency – like an illness. With the high cost of health care in the country, you can be thousands of dollars in debt before you know it.

This is why it’s very important to save up for an emergency fund. This money will help you get through very tough financial situations. You don’t have to rely on debt to pay off unexpected situations.

Spending Habits That’ll Help You Build Extra Funds For Debt Payments

February 11, 2021 By editor

Do you have any idea how influential your spending habits can be? It can make or break your financial situation. That’s not an exaggeration!

Some people believe that if they can only earn enough money, they can improve their financial position. Without a doubt, earning more money can help. But ultimately, it’s the way you spend money that will make a difference – whether that’s good or bad, it’s up to you.

Like if you’re earning $4,000 a month and your expenses reach a total of $4,500, what do you think will happen? You’ll have a deficit of $500. Where will you get the money to pay for that? You’ll use debt! Most likely, you’ll be using your credit card to pay for it. If you keep living this way, spending beyond what you’re earning, you can quickly accumulate a lot of debt. Since credit cards have a high-interest rate, it’ll be harder to pay it all off. The finance charge of your card will keep making your balance grow.

That’s how your spending habits can ruin your finances.

But if you can make sure that your spending is under control, you won’t have to worry about your finances. No matter what happens, your good spending behavior will lead you to make the right choices. Even when you’re in the midst of a crisis, you‘ll find a way to make smarter choices like saving more. Just like how the savings rate increased to 33.5% in the midst of a pandemic. Your habits will shape how you make decisions about using your money.

3 spending habits that create extra money for debt payments

With the right spending habits, you can reach any financial goal that you set your mind to. Like if you want to pay off your debts, your spending behavior will help you achieve that.

How? If you use the right habits, you should be able to create extra money to help with your debt payments. The more you can add to your monthly payments, the faster you can achieve debt freedom. Not to mention the savings you’ll get when you pay it off faster. You won’t have to pay a lot of interest when your debt is paid off quickly.

So what are the habits that you need to develop to shape your spending behavior?

Stick to necessities

This is a great habit to have. When you train yourself to stick to the necessities, it will be easier for you to avoid overspending.

But before anything else, what does it mean to stick to necessities? Ideally, these are the expenses that you need to survive. So if it’s not necessary for your survival, you shouldn’t spend on it. Whatever you don’t spend can be added to your debt payment fund.

Of course, there are things that may not be necessary for your survival, but you still have to spend on. These are usually the expenses that will help you earn more. If that’s the case, then it’s acceptable. Because whatever you spend will be earned back. Think of it as an investment. Even if it means buying something that’ll make you productive and profitable, then consider that a necessity. Just make sure it’s real and not just an excuse in your head to make spending on a want acceptable. Be disciplined in this restriction so you can maximize the funds you’ll get for your debt payments.

Use coupons

In one survey, 88% of the respondents revealed that they used coupons for shopping in 2020. If you really want to get that extra funds to pay off your debts, get used to coupons. This is one of the spending habits that will help you save on the usual purchases that you make. So even if you just stick to the necessities, if you use coupons on top of that, you’ll end up saving more.

Admittedly, the use of coupons can be tedious. You have to be very organized. There are a lot of coupons to choose from and it can be confusing at times. But if you get used to this, it’ll be easier over time.

Live on a budget

Let’s be clear about this. Budgeting is not exactly one of the spending habits. But this is part of this list because it affects how you spend your money. Your budget plan can shape the decisions you make about spending. If your budget shows that you don’t have enough extra money, you’ll be more careful about your expenses. You’ll find it easier to say no to spending.

To make this work, you have to ensure that your budget plan is updated. That means it has to be aligned with your current lifestyle. That’s how you can be sure that it supports what you really need at the moment and shows what your true financial situation really is.

Spending habits that can keep you in debt

Without a doubt, good financial habits will help you improve your personal finances. It won’t just help you with your financial situation. It will also allow you to develop a certain level of resilience. Your habits will allow you to grab opportunities and steer your decisions to where you know will only benefit you.

That’s something that you should really work on. Your spending habits are just one part of it. But it’s not just about what you should be doing. There are also bad spending behavior that you need to correct if you really want to reach your goals – like building extra funds for your debt payments.

If you don’t want any of your goals to be compromised, make sure you avoid these spending habits.

Impulsive spending

This is probably the worst kind of spending. It’s reckless and out of control. When it comes to your finances, you never want to lose control. You always want to know where your money is going. You want to make sure that every time you spend, it’s for a purpose.

Impulsive spending doesn’t have any of that. It’s not planned and it’s mostly based on your emotions. That’s dangerous because it can quickly make you accumulate a lot of debts.

Spending before saving

The other habit that you need to change is spending before saving. Some people take a look at their income and remove everything they need for expenses. Whatever’s left is then set aside for savings. If there’s anything left at all. That’s the wrong way to do it. If this is how you deal with your income, you won’t save anything. You won’t be able to build the extra funds that you’ll need to pay off your debts.

What you should be doing is to treat your savings like a bill. That means you have to determine a saving goal each month, then fund that first. Whatever is left, that’s what you’ll use to spend each month. If that’s your attitude, you’ll soon strengthen your finances because of the amount of savings that you’ve put aside.

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