Ignorance was never and will never be bliss in matters related to debt. There are few aspects which you need to understand if you are a frequent user of plastic money. For instance if your credit card balance is USD$4000 or less than that, you may require a very short time to get out of debt. The fact is a credit card company will want you to pay back the money in several years.
Pay more than the minimum balance
Undoubtedly, credit card companies allow you to repay debt in small amounts, but as a matter of fact you lose much more this way. It is a well known fact that you have to make a minimum payment every month towards credit card payments. It is usually 2% of the outstanding balance of the loan amount. If you are paying 2% every month, the creditors know very well that you ought to make this payment till the time you do not get out of debt.
Your monthly payments usually include the principal as well as the interest. If you are making a minimum payment every month, the major part of it goes into making payment for the interest and little goes into making payment for the principal amount. In this way, you actually pay more for an item you have bought. For instance if you have paid USD$5000 for making a purchase, it is more likely that you have to shell out USD$7000 for the same item when you finally get out of debt. It also takes more time to become debt free.
Tips to handle credit cards better
Given below are few guidelines which will help you to handle your credit card debts better-
- Use credit card for emergencies. Save it for favorable terms
- Try to pay more than the minimum balance
- Write down your credit card expenses and see where you can curtail them.
- Get into the habit of using your savings for repaying debts. You earn approximately 1% to 3% for savings. There is no point in shelling out 12% to 15% interest towards credit card interest.
- Use cards with low rate of interest
- Transfer high interest rate balances to cards attracting lower interest rates.
Keep track of all your expenses and just wonder what you could have done with the money if you were not required to give it to the credit card company. This will help you to get out of debt faster.
Moral:- Know how you can get out of debt by using your plastic money wisely.
