If you are the average American you will find 8 credit cards in your wallet. Having a credit card in today’s digital world is essential because it is both a safe and flexible way to make purchases. Often, people let their credit card debt get out of control because using a credit card is an almost inhuman process. A machine adds to your debt with only a receipt to show for it. Banks and stores increase your credit limit as a “reward” for keeping your spending under control.
The objective is to find ways to get creative about your credit card debt management by finding different ways to pay your bills.
Take advantage of the interest-free, 25 day grace period.
Most credit cards will not start to charge you interest until the amount you charged is longer than 25 days. You can take advantage of this by charging your groceries or other weekly/monthly expenses to your card. Just pay the bill before the end of the billing cycle. You can use the cash you hold on to and pay for other monthly expenses. This is a very effective strategy when tough financial times come your way. You can avoid falling behind on other bills that require cash and make only partial payments to your card. This is to help until you get back on your feet. It will also help your credit score because an unused credit card can lower your score.
Manage your minimum monthly payments to reduce your long term interest
Your monthly billing statement will have a table that shows the number of years it will take to pay off your total debt by only making the minimum payment, the other showing you the amount you will need to pay to eliminate your debt in 3 years. Most people have credit cards that have several APRs. If you are paying more than the minimum amount, change your payments to make higher payments on your higher APR cards. You will pay down more of the principal on the higher APR cards which will result in less overall interest over the long haul.
Here are some general tips on using your credit cards effectively.
- Do not use your credit cards to borrow cash unless you can pay it off quickly. The APR is higher and will cost you more over the long term.
- Do not get attached to a high APR credit card. If the opportunity presents itself, exchange it for a lower APR card later and transfer the balance of the old card to the new.
- Designate one card to be used only for entertainment and vanity purchases. This might be the card with the highest credit limit to use on vacations or holiday purchases. Many people find when analyzing their purchases a large amount is spent on non-essential items.
Using your credit cards to as a means of managing your credit card debt can seem counterintuitive, but when done properly will save you money in the long run and offer you breathing room when you need it.