For many people, their credit card bills are the most expensive thing they have to pay each month. Often, only their home mortgage payment is bigger than this. The number of people who have a lot of credit card debt is shocking, and many of them are having a hard time because of it. This article looks at some of the ways you can get control of your credit card debt.
Credit cards by themselves are not "bad." When people charge too much on their credit cards, problems start. This is especially true if the fees were for things that weren't necessary. Too many people use their credit cards to buy cheap things when they should just pay cash.
If you don't have too much credit card debt, the best thing to do is pay off the balance every month. If you pay off your whole balance before the end of the grace period, you won't have to pay any interest. Many people can never seem to get out of debt because of these high-interest finance charges. By not getting them in the first place, you will have a lot less money to spend.
Finance charges start when you only make the minimum payment or any payment that is less than the full balance. Here's how this could affect your budget and your future finances:
$1000 in credit card debt.
APR: 18 percent
$25 is paid each month.
If you only make the minimum payment, the following will happen:
11 years to pay off.
$1,115.41 was paid in interest.
As you can see, the interest you'd have to pay on this account is more than the total amount you owe on the credit card. Also, just this one charge will take you more than ten years to pay off.
Add to that the fact that most people have more than one credit card, and you can see how bad this can be for anyone's finances. Even worse, many people have credit limits that are much higher than $1000, which makes the problem even worse.
If you have a lot of credit card debt, you might need to talk to a credit counsellor. This person can help you set up a budget and negotiate with your creditors. If you miss payments or make a lot of late payments, it will hurt your credit history. This could make it harder for you to borrow money or get any kind of loan in the future.
People who owe a lot of money on their credit cards should also stop using them right away. This is hard for a lot of people, but it is the first step to getting their money back on track.
People who have more than one credit card should also sit down and write down how much they owe on each card and how much they need to pay each month. This is a good way to see where they stand (in black and white) with their credit card debt. If you know how bad the problem is, you can make the best decisions about how to fix it.
