Most Americans have some form of credit card debt. For some, that debt may have gotten out of hand and they may be looking for a way to manage it. It can actually be fairly simple to learn how to manage credit card debt, and almost anyone can do it. All it requires are a few strategies or solutions. Anyone can manage credit card debt with the proper guidance and tools.
Use Budgeting—Even Before Learning How to Manage Credit Card Debt
Budgeting can be a powerful tool to manage credit card debt. Essentially, budgeting is keeping track of all monthly income and monthly expenses. By keeping track of all incoming and outgoing funds, a person could figure out where their money is going and figure out ways to save. When it comes to managing credit card debt, budgeting can greatly help a person figure out what debt managing solutions work best for them, their income, and their expenses.
Solutions to Manage Credit Card Debt
Once a person figures out their budget, there are a few solutions to manage credit card debt that are available. Here are some strategies to use:
Paying More than the Minimum Due
This a fairly easy part of managing credit card debt, if you can afford to do so. Because of the interest that credit cards have, paying just the minimum doesn’t do much in terms of eliminating debt. So even if it’s a couple extra dollars more than the amount due, it could make a huge difference in the time it takes to pay off the debt.
Avoid Maxing Out Credit Cards
This is another solution that can be used to manage credit card debt. If you can avoid it—try not to max out your credit cards. The more balance you have on a card, the more interest you will have to pay every month. If all credit cards are maxed out, it be an extremely large amount of debt to manage.
Tackling the Biggest Credit Card First
This is a technique that many people use to eliminate debt. Allocate extra income to pay off the larger debt first, and then move on to smaller debts. For many people, this creates an almost ‘snowball effect’ and could make debt seem more manageable.
Debt consolidation is when a larger loan/debt with lower interest and better financing options is taken out and used to pay off any remaining smaller debts. This can work for those who have a good credit score or for those who have access to secured loans. Before choosing this option, it is best to do thorough research.
Once a person finds a solution that works—or a combination of solutions—debt can be managed much more easily, and hopefully be eliminated. It is important to remember to check a credit report every so often from all three major credit agency bureaus. This can help you monitor any mistakes, check up on your progress, and show early signs of credit card fraud or identity theft. It is also important to note that once a credit card is paid off, it is better for your credit to keep that account open.
How to Maintain Credit Card Debt Management
Once you figure out how to manage your debt, it is important to maintain it. Along with continuing to budget expenses, there are a few solutions for those who want to maintain debt management:
Keeping Saving: To stay out of debt, it is important to have savings. This is so you don’t have to lean on a credit card if an unexpected cost comes up. A savings of three to six months of income is recommended to keep people out of debt.
Avoid Opening Excessive Lines of Credit: Once debt is managed, it may increase a person’s ability to be eligible for even more credit card lines. However, it is best to avoid this temptation as it can bring a person right back to square one.
Pay Your Credit Cards Quickly: This is a good way to maintain management over debt. The day or week a credit card is used, use your debit card to pay off the balance. People do this to get the most rewards on expenses that they were going to use their debit card for anyways. This also helps spending within a budget.
Managing credit card debt can be fairly simple—if a person knows about all the different solutions and strategies that are out there. Once they find the solution that works for them, they can manage or even eliminate credit card debt.
Once debt is managed, or even eliminated, it is important that a person takes steps to preserve that freedom and balance. Many Americans are handed lines of credit at a young age and without the right tools to manage them. By learning management techniques, a person can get the most out of borrowing money from a credit card.