I just took a quiz on http://pbs.org to see how much I really know about credit cards. There was a question that said, "Nearly 144 million Americans have credit cards that can be used for almost anything. About how many of them pay off their whole bill every month?"
I could choose from 55, 90, or 115 million as an answer. They asked me to guess whether 38 percent, 63 percent, or 80 percent of credit card owners pay off their bills at the end of each month.
It wasn't a surprise to learn that only 38% of credit card holders pay off their bill each month. The other 62% are called "revolvers" and keep using their cards. These are people who always have a high balance on their credit cards and bring in a lot of money for credit card companies.
How come everyone doesn't do this?
The short answers are: not enough money, not enough knowledge, and bad planning. I'll give you each one example and hope you'll visit my blog at http://mypersonalfinance.com/blog and share your thoughts.
not enough money
Even though the economy may or may not be getting better, many people are still feeling the effects of hard times, such as layoffs. For people who have been laid off, paying their mortgage or rent is more important than paying off their credit card debt. They also use credit cards to make up for shortfalls each month, which raises the balance and makes it harder for them to pay off the whole bill.
Not knowing what to do
It seems to be one of our traits not to spend too much time trying to figure out how to solve a problem. If we have too many problems at once, we tend to make a list and only deal with the ones we can handle. Many people with high credit card balances have other things on their minds and just assume they have to keep their credit card for the rest of their lives. Because there is so much competition for your credit card business, many credit card companies offer good deals to get you to transfer your balance. If you call your credit card company, you might even be able to negotiate a lower term.
This information won't help you pay off your whole balance right away, but it might help you handle it better so that you can pay it off sooner.
Poor planning
Self-discipline, being too optimistic, and stress all affect how well we can deal with things. Your self-control will be put to the test by that new toy or those amazing deals on eBay that seem to call to your credit card. Spending your next raise before you get it is a sign of optimism that could backfire. Not to mention the stress. We do weird things when we're stressed, like go to the mall, get a massage to calm down, or go out to dinner one more time. All of these things add to our credit card balances.
With some planning, most of these problems can be solved. Make a list of the things you want to buy and how much they cost. When you get your next raise, look over your list and buy what's on it.
Make a list of new things and good deals and let it sit for a while. Give yourself some time to calm down before you buy something. You might be surprised by how many things you don't need and how many things you can buy later for much less.
Realize that stress is a part of life and make plans for how to deal with it. A walk in the park is better for you than a walk in the mall, and it costs less.
May you be able to pay off everything you owe.
- DISCLAIMER: Vishy Dadsetan, http://MyPersonalFinance.com, and My Favorite Shop, Inc. do not recommend any product or company. This article and website do not offer any professional services, such as legal, insurance, or other services. If you need help from an expert, you should hire a qualified professional. Even though Vishy Dadsetan has made every effort to make sure the information on this site is correct and complete, he is not responsible for any mistakes, omissions, mistakes, or inconsistencies.
Vishy Dadsetan (c)
