Credit cards are one of those vices that so many consumers today seem to be unable to resist using. These shiny pieces of plastic sit in our wallets, and when we open our wallets, they give us an option of making a purchase without having to use the cash in our checking account. Some people will walk into a store with the intention of using a debit card for a purchase only to switch to using a credit card for the purchase at the last minute. Others will use credit cards to pay for larger expenses that they just don’t have cash for at all. The result of these purchases for so many people is either creating balances that they cannot pay off in full at the end of the month, or otherwise adding to an already high outstanding balance.
The Balancing Act
Almost everyone who has a credit card has heard financial advice stating that you should not charge more to your cards than you can afford to pay off. Many people do try to follow this advice, but somewhere over the course of a month, the best laid plans fall to the wayside. The ability to balance credit card purchases made over the course of a month with the amount of cash you have on hand to pay off that balance in full is difficult for most people to do. One of the reasons this is so difficult for most is because they do not track credit card spending at all. Many are quite surprised to see how much money they have charged to the card since the end of the last billing period. Others are already carrying balances that they add to with each purchase they make. This only compounds the problem of debt, making it even more difficult to pay the balance off.
Jeff’s Note: this used to be my problem when I was carrying balances. I never really kept track of what I was putting on the card (or how much) because it’d just get added to a total that seemed like it would never go down.
A Compounding Problem
Of course, making charges that you cannot pay off in full each month is only part of a compounding problem with credit cards. Many credit cards today have an interest rate of 15% or more, and many also will charge you an annual fee as well as late fees if payments are not made on time. These interest charges, annual fees, and late charges all get added to your current outstanding balance. Interest accrues on these charges each month, too, in addition to your own charges for purchases. Clearly, the balancing act of using credit cards responsibly can quickly be thrown off kilter. These additional charges can make it very difficult for consumers to regain control of their credit cards once the balance has been altered.
Bad Credit Credit Cards
If you have bad credit at the time your credit card account was opened, you likely have a bad credit credit card. The interest rate on these cards generally is very high, and may exceed 22%. Further, consumers should be aware that credit card companies do regularly check up on their customers by reviewing their credit rating. So your account may start out with a lower interest rate, but the credit card company may adjust your rate upward if they feel your credit rating has dropped. So while you may have made charges to your card at one time with a 10% interest rate, you may now be charged a 20% rate or higher on that balance now at the whim of the credit card company.
Restoring the Balance
Many consumers today have lost control of that fine balance with their credit cards, and they now are finding themselves burdened with credit card debt that they cannot seem to gain control of. If you are in this position yourself, you should first stop making charges to your account. Then consider adjusting your personal budget to free up additional money for credit card payments. Often, eliminating cable TV from your life for a few months or a year, or making other similar changes, you may be able to pay off your credit card balance or pay it down considerably so you can restore the balance once again.
Jeff’s note: It took me much more than cancelling the cable tv to pay off my credit cards. I got a 2nd job, got rid of a lot of useless expenses, and worked all the time to pay them off, and stopped using them cold turkey until I felt like I was back under control.
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