Credit Card Debt

Credit cards offer convenience and flexibility but can also get you into trouble, especially when interest rates soar. It’s easy enough to swipe a card and just as easy to build up a load of credit card debt, especially if you only pay the minimum each month. Managing credit card debt in your budget planner helps keep your credit card balance manageable.

Credit Card Debt Has a Big Impact on Your Budget

If you allow the balance on your credit card to carry over to the next month, the credit card company charges you interest – and that interest is often upwards of 25 percent and higher. Some cards carry additional fees in addition to interest. This makes it challenging to pay off the debt, especially when you spend more the next month and only pay the minimum amount due.

Because of the higher interest rates on this unsecured “loan,” credit card debt can quickly spiral out of control. High credit card debt can also lower your credit score as your debt-to-income ratio declines.

Budgeting Credit Card Debt Away

Creating a monthly budget is the best way to save money and lower credit card debt. Your budget should include any amount you charge for the month plus an amount higher than the minimum payment. This is the only way that you’ll be able to pay it off quickly. The more you budget for the minimum-plus payment, the faster you’ll pay it off, as long as you also pay what you spent.

In other words, you should be using credit cards as a convenience only if you can afford to pay for everything you charge. It is understandable that you may have a large emergency purchase. In that case, you should always pay the minimum plus a set monthly amount toward that purchase, plus the convenience charges you put on the credit card.

Regardless of the current balance, always budget an amount that is manageable so you can pay it every month, even if it means not using your credit card until you get the balance down to zero.

Don’t Let Credit Card Debt Be a Burden

While it’s entirely feasible to get rid of credit card debt on your own, you may feel as though you need help. Reputable credit card consolidation companies, balance transfer cards that are low-interest credit cards and debt consolidation are all ways to get out-of-control credit card debt under control. Other solutions include debt negotiation and debt settlement, but these could have a negative impact on your credit score if you’re not careful.

Browse through our credit card debt blog to learn more about managing credit card debt and options to get rid of this debt.