Most people need a credit card, it’s a fact of life when building credit and shopping online. However, the debt that comes with it should never get out of control.
If managed properly, a credit card can enhance your credit score and even save money in the long run. The experts at Broussard Poché, LLP have a few tips to keep in mind when choosing a card.
1.) Analyze Your Patterns
Take a look at how you spend your money. If you are unsure, make a spread sheet or chart to track your spending over the course of a month. This is important because some credit cards offer higher rewards in different categories. Some offer rewards for restaurants, others for gas and many for travel. There are a ton of options to choose from, so you need to know which makes the most sense for you.
2.) Look at the Fine Print
Most cards offer a few perks here and there, but it’s important to know which perks you’ll use. For example, if a card offers “free checked bags” on a certain airline, but you only travel once or twice a year, it’s probably not the right fit for you. And make sure to check if there is an annual fee. It’s OK if there is, but you need to make sure you will use the card enough to justify the annual fee.
Once you pick the card that’s right for your situation, be sure to cash in on the rewards. Many people let their rewards devalue or expire altogether. Don’t leave perks sitting around unused.
Now, how about handling debt? It happens to many well-meaning people; credit card debt can sneak up on anyone. There are ways to manage credit card debt without having to live on a shoestring budget.
3.) Avoid Long-Term Interest
Don’t just pay the minimum. The point is to get your debt paid off quickly to avoid unnecessary interest charges. If you are only paying the minimum you owe it could take years or even decades to get rid of your debt. Depending on your interest rate, that means you will spend precious dollars on interest payments and not principal payments.
4.) Debt Snowball Method
The Debt Snowball Method really works and thousands of people use it to get out of debt every year. Here’s what you need to do:
- List all of your debts from the smallest balance to largest (leave out your mortgage)
- Budget to pay the minimum payment on every debt
- Then calculate out how much extra you can put towards paying off your debt
- Pinpoint the debt with the smallest balance, pay the minimum PLUS your extra money
- When that debt is paid off, roll over all of that money into the next smallest debt (old amount +minimum)
- Repeat and keep rolling over payments until all your debts are gone
5.) Consolidate Your Debt
If you get in a real bind, this strategy lumps all of your payments into one. It’s easier to keep track of and you may feel like you’re making progress at a faster rate. You can automate payments so you don’t have to worry about paying late. Just note that the debt doesn’t actually go away—consolidation just simplifies the payment process. As with all debt payment processes, paying more than the minimum payment is the only way to make any headway against the debt.
It can be scary to look at all of your debt at once, but it will be beneficial to know what you are up against. It all starts with choosing the right card and following through with a realistic budget.