Between 2008 and 2012, the amount of credit card debt among U.S. consumers climbed to an all-time high. The struggles of a volatile economy and the open-door policy of many credit card companies aided in the financial downturn that faced millions. Today, after a slow climb back to the top, credit card companies and consumers alike have learned that financial responsibility should be a top priority. Here are five things that every person should know about credit card debt.
Control Your Spending. One way financially smart people use credit cards is to pay monthly expenses which have set rates. This include cell phone plans, cable/internet, and insurance. They set aside the funds for those expenses and pay off the balances on their credit cards each month. This keeps their overall balance low and controls unnecessary spending.
Don’t Use it If You Can’t Afford It. Just because credit is open and available to you does not mean that you have to use it. Some individuals save credit card usage for large purchases or emergencies. This allows you to keep benefiting from having revolving credit. A good rule of thumb with any credit purchase is to not make the purchase if you know you cannot afford it and it is not a necessity.
Debt Affects Your Credit Score. The amount of usage on your credit cards can have an adverse impact on your credit score. Credit reporting companies look favorably upon consumers who use less than 30% of their available credit each month. If you happen to make a big purchase, you can pay down your balance before the end of the billing cycle to keep the reported balance below this point.
Credit Card Payments Also Affect Your Score. Timely payments are crucial to boosting your credit score. Continued late payments are reported and can cause a drop in this score. Credit card companies also use your payment practices as a guideline for helping them decide whether or not to increase your limits. Consistent payments of more than the minimum balance will help you remain in good standing.
Ask for Help When Necessary. Most credit card companies have programs now to assist individuals with deferred payments if they undergo a change in their financial situation. It is in their best interest to work with card holders to keep them as customers. Just the same, it is in your best interest to work with them and find a way to remain in good standing through the ups and downs of everyday life.
If you find yourself at a crossroads of late payments and too much debt, then it might be time to consider your options for getting out of debt. Contact the attorneys of SM Law Group today for a free consultation.