The Dos and Don’ts of Debt

It’s easy to run up your credit card debt without realizing it. Even if you’re not an extravagant spender, and only use your card to buy essentials, those essentials can add up quickly and leave you in a tight spot. Not only that, but a few poor decisions can make a bad situation even worse. Here’s a list of things to do and not to do when it comes to getting out of debt.

Do: Think long term.

Most people see their credit card bills as a monthly obligation. Make this payment, and it goes away until next month. The problem is, with that mentality, all somebody will do is the bare minimum. This means that payments will keep coming back each month, for much longer than they should, and cost a lot more.

When it comes to credit card debt, you need to think about more than just this month. You need to consider how your decisions today will affect your financial situation five, ten, or twenty years down the line. Will you still be making payments on this card? How much extra will you have paid above and beyond what you initially spent?

With that in mind, make more than the minimum payments whenever you can, to get out of debt sooner and prevent interest from accruing. If you can’t afford to overpay, look into other options and resources for bringing your debt down quickly.

Don’t: Try to pay off more than one debt at the same time.

Let’s say that you’re paying off three different credit cards, as well as a car loan and a student loan. In order to follow the advice in the previous section, you take whatever leftover money you have each month and divide it amongst all of those debts, so you can overpay on all of them.

This is a bad idea. You won’t be making much of a dent in any of the debts, and the responsibility of trying to pay off everything at once can overwhelm you. Instead, start with the loan with the highest interest rate and work towards paying that debt off first, while continuing to make the minimum payments on the others. Once that one is taken care of, move on to the next highest interest rate, and so on. This will help you get out of debt faster and reduce the overall interest you accrue.

Do: Look for a lower interest rate.

The more interest that accrues, the longer you’ll be in debt. If you can get a lower interest rate on your debt, it can go a long way towards helping you pay it off. So how can you do that? Start by asking. Often, if you call your credit card company and ask them to lower your rate, they’ll be willing to help you.

If they don’t want to give you a lower rate, there may be another company that will. Many credit cards offer balance transfer options. When you sign up for a new card, you can transfer over your debt from a previous card at a lower interest rate.

Also, be aware that your current credit card company knows you have this option. That’s why they’re often willing to lower your interest rate themselves—so they don’t lose you as a customer. Keep this in mind when negotiating with them.

Don’t: Close your account once your card is paid off.

Once you finally pay off a card that’s been looming over you for years, the temptation is to get rid of it and never think about it again. But if you want to improve your credit score, you’ll keep the card. Your score isn’t just about how much debt you have, but how much credit you have available.

Some people will tell you to continue making small purchases on the card and paying them off quickly. However, this is unnecessary. In fact, not using it can work to your advantage. Having credit that you can use but don’t, demonstrates responsibility on your part, which can improve your credit score.

Getting out of debt is difficult, and it takes time, but it’s within your capabilities. Contact us for more help and resources for paying off your credit cards and eliminating debt once and for all.

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