Credit Card Debt and How it Sneaks up on You

By: Nathan Dawson

After a long weekend you find yourself spending a little more money than you planned for, but you couldn’t help it and you charge it to your credit card. You figure you can worry about it later and pay it off next month. Well months come and go, and you’re still in credit card debt- which is rapidly growing. How did this happen, and what can be done about it?

The biggest mistake people make about credit card debt is that they don’t take interest rates into consideration. Paying off a little every month isn’t going to reduce your credit card debt. Each month credit card companies charge you interest over the entire remaining unpaid balance. The amount left on your balance will determine the accruing interest and obviously, the sooner you pay it off the better. Making monthly payments that are above the minimum is step number one in protecting yourself against the stealthy credit card debt and will surely help keep your debt under control. Remember, creditors get their money from you being in over your head- late fees pile up and by paying only the minimum payments, you are only paying off the interest, not the actual debt.

Another point to look at is your budget. How well do you budget your money? Are you living paycheck to paycheck? Can you afford your current lifestyle? Do you frequently buy things you don’t need? All these questions can help you determine whether your budget fits you and your lifestyle. We all want nice things, but relying on credit cards to give us those things isn’t the way to go. If you find yourself paying for necessities like groceries in return for living in that “luxury” apartment, that’s a pretty good indicator you are not living within your means and need to either relocate or cut some of your other costs in order to lead a lifestyle more in your means.

When making a budget calculate your total income that you bring home, then subtract out housing, utilities, car payments, insurance, phone bills, etc. Take that number and subtract gas for your car, food expenses, and any other bills that you have. After all the bills are paid this is what you have left for luxury spending. Although, you should consider placing a percentage of that in a savings account. By using your savings to buy those wonderful luxury items, you can keep yourself out of credit card debt. It’s hard for those of us that have “Champagne taste on a beer budget’. But by saving for that amazing vacation and you won’t have to worry about all the bills piling up when you return and that is a great feeling.

Some changes you can make in your daily life to save money are to carpool to work. Also when you go to the grocery store have a list and your meals planned out to prevent compulsive purchasing. Consigning the clothes you no longer wear is also another way to get a little extra money.

If you find yourself in credit card debt, there are actions you can take to help get you out. You can get a second job, reallocate money in your budget, or if you have multiple credit card debt, you can consolidate your debt. By speaking with a debt counselor you can gain information and they can help you find the best solution to credit card debt.

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Nathan Dawson writes for a great online source for finance information in dealing with bad credit, debt management, as well as bankruptcy.

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