From student loans to credit cards to auto loans, there are tons of different ways to get wrapped up in debt. With the utter convenience of using credit cards and buying things without cash, people hardly think twice before taking out their cards from the wallet. Unknowingly, they charge more than what they can afford and this is when they fall in unsecured credit card debt that gradually takes a toll on their finances. While there are ways in which you can repay your credit card debt, very few people are aware of them. Getting out of debt often seems intimidating but avoiding the most common debt mistakes will certainly help you do so as quickly as possible. Read on the concerns of this article to check out the different debt blunders that you should avoid committing.
Racking up credit card debt
What it means: If you’re someone who spends beyond his means every month and depends on your credit card to make up for the difference, you’re in for some trouble. You are actually digging your own grave.
Why: Using your credit cards for purchasing everyday stuff like gas and groceries can land up with reward points and even some cash back offers. Even credit cards can be essential for booking a flight, but lingering credit card get can soon get nasty. If you have too much balance that you have been carrying from one month to another, you will soon find yourself up to your eyeballs in debt, thanks to the compounding fees and interest rates. The interest rate which is generally high will get added to your outstanding balance every day and this will increase the amount payable.
How to avoid it: Try to whip your plastics only when you’re positive that you will be able to pay off the balance at the end of the month. Carrying off balance from one month to another will not only increase the debt amount but will also have a detrimental impact on your credit score.
If you’ve already committed the mistake: Well, if you’ve already committed the mistake of racking up debt, you’re not alone and you don’t need to fret. Americans owe more than $900 billion in credit card debt. To stop the debt from multiplying, the first step that you need to take is to stop charging and digging yourself further into debt. Stop this cycle by following a budget or by combining your balances through debt consolidation companies and paying them off.
Paying off late or failing to pay at all
What it means: Someone with a credit card balance should always make timely payments and whenever possible in full.
Why: Constantly, late payments can incur huge penalties and hence they should be avoided. Late payments also have a bad impact on your credit score.
How to avoid it: Ideally, you should pay more than the minimum payments every month but if that is not possible for you, you can pay at least the minimum monthly payments on all your cards. Don’t make the mistake of trusting yourself to remember. For all the loan payments that stay the same each month, set up automatic bill payments with your bank. Just set up a reminder date or a due date on a calendar.
If you’ve already made this mistake: If you’re usually on time with your payments but this monthly you’re struggling hard, you might be able to waive off a late fee by giving your lender a heads up. But in case you’ve got a history of late payments, the only way to start cleaning your report is to make the payments.
Trying to pay off debt without a clear plan
What it means: With a clear plan on debt repayment, you can systematically pay off debts. Create a timeline showing when each of your debts can be paid off.
Why: Debt may have become too common but it is not easy to get rid of. So, if you’re inattentive towards your credit card debt, you can never prevent it from growing. With a plan, you can track your progress and it can also help you from giving up.
How to avoid it: Jot down your total outstanding debt amount with the interest rates on each of them. Check your current monthly income, your expenses so that you can calculate the time by which you can get rid of your debts. Also prioritize your cards according to the interest rates that they carry.
If you’ve already made this mistake: There’s no other option but to get back on track by designing a plan because it’s never too late to start planning.
So, if you don’t want your debts to rule you, avoid committing the above mentioned debt mistakes. Even if you do make mistakes, start mending before it’s too late.