Your credit card habits are probably to blame for all the debts that you owe. While it may not be the highest debt in your list, it is usually the most destructive.
The truth is, having credit card debt is the norm in our society. Oftentimes, people treat it like an extension of their wallet. In fact, a study revealed that low-income families use it to cope with daily expenses. Those who earn less than $50,000 a year typically use it to buy groceries and other essentials.
While there is nothing wrong with using it to buy for basic necessities, it can be very dangerous. The high-interest rate of the card will cause your balance to go up quickly. If you are not careful, you might end up owing a lot of money within a short amount of time.
4 credit card habits that will lead to so much debt
Using credit cards is not bad but you have to know how to do it properly. That includes knowing what you should be avoiding.
Here are 4 of the most disastrous credit card habits that you need to get rid of.
Failing to pay your balance within the grace period
If you want to avoid the high interest rate on your credit cards, you need to learn how to pay the full balance within the grace period. This is the period between the date of purchase and the due date of the billing statement where that transaction is included. When you pay beyond this period, finance charges will be added to the balance. The bigger the balance the higher the finance charges that will be added. It can quickly grow your debt. This is the reason why it is ideal for you to pay more than the minimum payment requirement.
Making late payments
This is probably one of the credit card habits that can quickly destroy your credit score. If you have the habit of paying your dues late, you are not alone. Statistics reveal that around 40 million credit card holders all over the country expect to miss one credit card payment in 2019. If you want to improve your debt and financial situation, you have to make sure that you can stick to your payment due dates. Set up reminders to ensure that you will not forget a payment. Apparently, forgetting is one of the common reasons for late payments. If you find it too hard to keep up with all your credit card payments, you might want to consolidate your debts so your monthly repayment will be easier.
Reaching the maximum limit
If you have the habit of waiting for your credit card balance to reach the limit, then that is another habit that you need to get rid of. This can quickly destroy everything that you have worked hard to achieve. Some people use their credit cards recklessly and only make aggressive payments once they have reached the maximum limit. This is definitely one of the credit card habits that you need to correct. Not only will it lead you into a huge amount of debt, but it will also affect your credit utilization rate. This will influence your credit score negatively.
Opening credit cards you do not need
A lot of retailers offer store credit cards that will give you immediate discounts on your current purchase. That can be quite appealing especially if you were about to buy a lot of things. Getting a huge discount can easily sway you to sign up for the card. However, that is a really bad idea. The more cards you have, the more temptation there is to spend beyond your budget. Even if you have no plans of using these cards, you will still be charged with fees to keep that account open. This will just be a waste of your money. Eventually, it could have a negative effect on your credit score.
In case you are guilty of these credit card habits, you have to put a stop to them. You need to develop the right habits that can improve your financial well-being and not destroy it.
Try consolidating credit card debt to solve your problem
In case your bad credit card habits lead to the accumulation of your debt, you might want to consider getting debt consolidation help. This is one of the effective debt relief strategies that you can use to solve your credit issues.
There are a couple of reasons why debt consolidation can help improve your financial health.
Single monthly payment
First of all, consolidating credit card debts can simplify your monthly payments. Instead of trying to monitor all your credit accounts, you will be combining all of them under one account. It usually involves opening a new credit account that has enough funds to pay off your original credit card balances. Once that is accomplished, you are left with one credit account with the total balance of all your previous debts. You now have just this one account to focus on. That means remembering just one due date. The chances of forgetting a payment will be unlikely to happen. Not only that, it would be easier to incorporate that into your monthly budget plan.
Lower interest rate
Another thing that you will get from debt consolidation is a lower interest rate. Since there is no debt reduction when you consolidate debt, your best option is to ensure that you will have a low-interest rate. When you have mostly credit card debts to consolidate, you can get a secured or unsecured loan. Both of these have a lower interest rate compared to credit cards. This will allow you to save on the overall debt that you have to pay off.
Better repayment terms
By consolidating your debts into a new credit card account, you are also given the chance to change your repayment terms. Whether you want to have a longer or shorter repayment period, that is up to you. These changes will allow you to pay off your debts while allowing you to improve your financial future. For instance, if you wanted to start saving for retirement, you can choose a debt consolidation strategy that will allow lower monthly payments. Any extra money that you have can now be used to give your retirement money a boost.
As you pay off your credit balance through debt consolidation, you have to make sure that you are also working on another goal. You need to make sure that you come out of this situation with better credit card habits. Otherwise, you might find yourself in the same debt situation in the near future.