What Do You Do When You Finally Pay Off Your Credit Card Debt?
The problem is, it is darn near impossible to live without a credit card or two. Otherwise, how do you buy online, book a flight, or rent a car? You can still use a credit card after you have taken care of your debt, just do so in moderation.
Credit card debt is a very big problem that is being faced by a lot of people who have been irresponsible and undisciplined in the use of their credit card. Though some might have landed up with credit card debt due to some unfortunate event or emergency in their life, most people carry a credit card debt due to their own financial mismanagement.
There are a lot of ways to pay off credit card debt and a lot of people do achieve this feat. Surely, to be able to pay off credit card debt is really a great achievement in itself for not everyone is able to pay off credit card debt. It takes a lot of discipline, restraint, planning and perseverance to finally pay off credit card debt. However, there is more to paying off credit card debt then just being able to pay off your credit card bills.
What happens to your life after you pay off your credit card debt successfully? As mentioned before, of all the people who try to pay off credit card debt not everyone is successful. However, some people fail after they have succeeded in paying off credit card debt. These are those people who let themselves loose and go on a spending spree as soon as they pay off credit card debt.
Soon, these people again end up with a credit card debt and are again trying to pay off a stack of bills. So, its not enough to just pay off credit card debt, its equally important to maintain a debt-free status even after you pay off credit card debt; only then can you enjoy a stress-free life in the world of credit cards.
So learn your lessons well and do not let yourself wander down the path to more credit card debt. Most of the rules that you followed when you were trying to pay off credit card debt, will also hold good after you have paid off your credit card debt.
Here is a quick synopsis of things that you should take care of even after you pay off credit card debt:
1)Do not overspend. Giving in to the sale offers for something that you dont really need, is a big mistake that leads to overspending
2)Always remain within 70% of your credit limit.
3)Make credit card bill payments in time and in full.
4)Dont hold more than 2 credit card accounts (two are enough for anyone)
These are just very basic things you can do to keep your credit under control; you can add more based on your own experience and knowledge.
It has never been easier for people to live well beyond their means than it is today. Credit is easy to obtain, and in a society obsessed with material gain, credit is sought and used on a basis that is so regular even financial watchdogs are beginning to sound warning bells. The average savings for the United States and Canada over the next few years are actually expected to go into the negative figures, as more people purchase what they cannot afford.
One of the main contributors to this phenomenon is the credit card. Credit cards are very easy to obtain, and most people get them thinking they will be handy in an emergency. This is the case, but what the credit card companies know is that it will not be long before you use that piece of plastic to make a purchase that is certainly not in an emergency situation.
One way that credit cards have succeeded in getting a flood of people to spend beyond their means is to make credit cards available everywhere. The rise of the Internet has fueled a massive increase in the use of credit cards, as it is often the sole means people have to make an online purchase. Anytime you make a credit card purchase, however, there is the chance that you will forget about it. Statements that come out once a month are a great way for credit card companies to make sure their customers rack up the bills to the point where they will not be able to pay them all off in one shot, and thus gain the hefty interest.
Credit card companies also use promotional gimmicks to entice customers to charge all of their purchases on their cards. Most credit card companies have teamed up with auto dealers or some other company in order to give customers points towards future purchases. Visa has the well-advertised Win What You Buy campaign. People can be so tempted by this that they place all their purchases in the Visa in the hopes of getting it all for free. The prize, however, is rarer than winning the lottery.
Staying out of credit card debt requires using that piece of plastic frugally. If you dont have the money in the bank to make the purchase, do not do so with your credit card – it will only cost you more money in the end. If you do encounter an emergency and have to make a payment on your card, pay it off as soon as possible. If you cant do this, look into getting a line of credit from the bank. This may seem like stealing from Peter to pay Paul, but banks often offer a lower interest rate than a credit card, and the advantage of a line of credit is that banks automatically deduct an amount every month out of your other accounts toward your debt. Credit card companies are just as happy to have that debt grow and grow.
Many people do not realise when their credit card debt is getting on top of them until it is too late.
The best thing to do to see how you stand with your credit card and how much you are paying back to them each month, is to calculate your monthly earnings and then calculate what you can afford to put back into your credit card account. You will then you have to divide your earnings by what you make in payments to your credit card and if you arrive at a figure of 15% or more going towards your card debt, then you are facing the chance that you are falling through a debt trap door that you cannot get out of.
If you find that you are in this position, the best thing that you can do is to stop using your credit cards and look at other areas in which you can cut back in your expenditure. The thing that I am going to suggest may not be what you would think, but it can go a long way to saving you a lot of money. The area in which you can save cash is your grocery bills, but I have to eat I here you say that is true as it is a fabric of our being, but it is the manner in which we spend our cash on groceries, that costs us a large slice of our monthly bills being higher than it should be.
Lets start with how many times that you have been looking through the newspapers, and you have came across money off vouchers on products that you do usually buy and ignored it and then threw the paper in the bin? Loads of times I bet and when in the supermarket do you go for the big named brands that are a lot more expensive but are told that they are of higher quality? Of course you do, but the fact of the matter is that the big name brands are not that much better, than the stores own branded labels and in many instances the product is made in the same place and are very similar.
Even if you see the big named brand with a promotion of 50% free or buy one get one free, you will find in many instances that it will still be cheaper to buy supermarket own brand products. And what you must also remember is that these firms are not going to sell their products at a loss. So just think at the high mark up price that they are usually at when not on a promotional price.
So by cutting down on your grocery expenditure, you will soon see the difference in your credit card debt, as you put what you are saving back in to clear your credit card balance.
At the same time as cutting your debt, remember to pay your credit card bills on time. Credit card late repayment penalties can work out to be very expensive and could actually undo all your good work. Credit card late payment penalties are currently being brought down to 12. This reduction was brought about by pressure from the Office of Fair Trading (OFT)
If credit cards have become a way of life for you, it might be time to organize your credit cards. If you have a lot of credit card debt, you might even want to look at consolidating your cards to a lower rate card that will save you in interest charges. Be careful, done incorrectly, canceling and consolidating credit card debt can harm your credit.
Before you consolidate, first you need to recognize why you want to consolidate. Are you looking for lower interest rates? Do you need lower monthly payments? Do you simply need to stretch out the term of your loan? If you answer yes to one of the last two questions, you should beware.
If you really just want to get out of debt, you need to understand how you got into the mess. Then you can fix the mess. Simply solving the problem with debt consolidation often makes the problem worse. Too many people consolidate and then charge the cards back up again.
If you know that you need to reduce the number of credit cards you have open, start with determining how much credit you need. How do you use your cards?
If you have several department store and gas cards that you never use, you should go ahead and close them. You also shouldn’t need to pay a yearly fee for a credit card that earns you gifts, like cash back or frequent flier miles. Pay attention to whether you use the miles or not. You may find that what you are paying isn’t worth what you are receiving.
You really only need one or two credit cards. Ideally, you need one card that is only used in emergencies. There are several steps you can take to start consolidating your balances into fewer cards.
Start by paying off all of the low balance cards that you plan to cancel and then close the accounts. Then, transfer your remaining balances onto the card that has the best interest rate. You can’t use this card or the other cards until it is paid off.
Now you need to have one or two cards that have high enough balances to cover your charging needs. Make sure that they have the lowest interest rates you can find. These should be the only accounts you have open. IF you charge to them, make sure you pay off each balance in full every month.
When it comes to balance transfers, there are some questions you should definitely ask. Find out how long the transfer rate lasts. Sometimes you can be given a rate for balance transfers that only lasts a few months. Find out if the rate is just for balance transfers, or is it for transfers and new purchases?
You need to find out about the fees that apply. Is there an annual fee? Find out what the late fees and over-the-limit fees are. Some institutions will charge balance-transfer fees as high as 4%. The higher the balance, the higher the fee. Just add it up: 4% of 5,000 is 200!
Read through your credit card offers very carefully. A lot of information is hard to understand (and find). Some offers waive the fees for the “initial balance transfer” only. This could be your first transfer and not the additional ones.
Each additional balance transfer will be treated like a cash advance and charged cash advance fees, which are very expensive.
If you feel comfortable with the terms offered to you, fill out the balance transfer form carefully. Mistakes can mean that the transfer won’t go through. Keep making the minimum payment on your old card until you are absolutely sure that the balance transfer has been completed. This can take two to four weeks. You don’t want to try to lower your payments and still receive a late fee and penalty.
Even though the new card company will contact you when the transfer is complete, you still need to talk to your old card. Call and verify that there is no balance left on your account. Write down the representative, time, date and what is said every time you talk with a company over the phone.
Have your card company send you a billing statement with a zero balance stated on it. You may need this in order to clear up any mix-ups. Oh, don’t forget to close your old card, you don’t want to accidentally charge on it!
There are some situations that can occur when you are consolidating your credit cards. You don’t want to suffer because you are taking control of your credit. Manage your transfers well and you should avoid errors.
Don’t cancel a card that still has a balance. This causes your rate to shoot up, because they know that they have to get the most out of you now. Don’t even tell a card issuer that you are leaving until you have no balance. Many issuers will raise rates if you cancel with a balance remaining.
Pay all of your cards on time no matter what. It can take one late payment for your interest to go from 9% to 28%. Amazing, isn’t it?
Don’t start canceling all of your cards before you apply for a mortgage or car loan. This can make your chances of approval even lower. Credit scoring is based on many factors, including how much debt you have and how much you have available. If you have cards with no balance on them, it can raise your credit score.
You need to remember, even if you find better terms for your debt, it is still debt. You must be sure that you pay it off before you add to it. If you don’t, then it will never end.
Consolidation doesn’t offer you a new start, just a better path to paying off your debt. If you truly want to get rid of your debt, use consolidation as a way to put all of your debt in one payment. And get out the scissors.
These days credit card or plastic money is very popular and used extensively. It is indeed of great utility if used in a calculative manner, but it is also the main cause that leads many people trap into credit card debt. Let see how it happen to most of people.
Many of retailers are implementing easy payment scheme for their products or services, with some fraction amount of money for monthly installed, you can buy thousand of pounds of items or go for a luxury vacation which you can’t afford to buy if one lump sum of money is needed, these monthly installment are automatically charge to your credit card. Every month, you just pay the minimum amount of your credit card balance and you continue spend on your credit card. Let use a case study to review on how a person credit card debt can grow and how it will take to get rid of it.
Case Study
Scott earn 2,500 a month, he is holding a credit card with interest rates of 12%. All his credit cards allow him to pay a minimum of 3% or 10 which ever is higher. His credit card limit is 15,000.
Scott’s credit card balance at current month is 4,550 (3000 in principle and 1550 interest). He tends to pay the minimum of his credit card balance and each month he will averagely swipe about 500 on petrol and other utilities.
Let see how’s Scott’s credit card balance grow:
Month 1
Credit card balance = 4,550.00
Minimum Payment = 136.50
New Credit Card Spending = 500.00
New Balance = (4,550 – 136.50 + 500.00) = 4913.50
Month 10
Credit card balance = 7976.02
Minimum Payment = 239.28
New Credit Card Spending = 500.00
New Balance = (7976.02 – 239.28 + 500.00) = 8236.74
Month 20
Credit card balance = 11109.85
Minimum Payment = 333.29
New Credit Card Spending = 500.00
New Balance = 11109.85 – 333.29 + 500.00) = 11276.55
Month 30
Credit card balance = 13662.60
Minimum Payment = 409.88
New Credit Card Spending = 500.00
New Balance = 13662.60 – 409.88 + 500.00) = 13752.72
Month 36
Credit card balance = 14961.02
Minimum Payment = 448.83
New Credit Card Spending = 500.00
New Balance = 14961.02 – 448.83 + 500.00) = 15012.19
If Scott continues his practice, his will hit his credit card limit after 36 month compare to current month.
Let say Scott stop using his card with the balance at month 36 of 15012.19 and continue paying the monthly minimum. It will take him 228 months which equal to 19 years to just to pay off his 15012.19 debt.
The above example is just a simple case study to show you how your credit card debt may piles up so quickly without you even aware of it. You need a lot of time and spend a lot of money on interest in order to get rid of this debt. In real life, many people have more than one card and other loans to support; hence situation may even worse.
How to get rid of credit card faster & affordable?
If you are already at this situation, the first thing you need to do is to change your behavior of paying the minimum only. Paying more each month will definitely pay off your debt faster but the question is you may say that you can’t afford to pay more than the minimum. In actually fact, the easiest, faster and affordable way to get rid of your credit card debt is maintain your current minimum monthly payment.
For example, we use back Scott’s case. If he affords to pay the minimum payment of his 15012.19 debt, which is 448.83, this is his affordable payment. If he continues to pay 448.83 every month instead of the minimum of his credit card balance, he will need only 43 months to pay off his debt as compare to 228 months. This mean, Scott will have his debt free life in less than 4 years instead of 19 years.
In Summary
Credit card will remain important in many people life, use it intelligently for your convenient, but you much carefully manage your credit card balance, don’t let this plastic money drag you into financial crisis; the ideal way is pay the balance in full each month.
There are certain things in life that you will wish to avoid if you want to have a secure financial present and future for yourself and your family. Credit card debt is certainly one of those things that you should be avoiding. People do not always realise or think about it but keeping an outstanding credit card balance is one of the most expensive financial arrangements you could possibly subscribe to. If you have even an average interest rate, and not too much of an outstanding balance, you could be wasting literally hundreds of pounds a year by not paying off your outstanding balance in full each month.
There are also other problems with keeping a high amount of credit card debt. You will be making your credit rating worse for one thing. And this is something that you should be concerned about. Credit providers, banks, insurance companies and even employers will use your credit rating as a means of assessing your financial standing. If you have a very high outstanding credit card debt, or are close to your credit card debt limit, this will be regarded as a negative in the assessment of your credit score and for this very purpose, it is something that you should be attempting to avoid.
A lowered credit rating will cause you to receive worse terms and offers for future credit. For example you may get
Higher interest rates
Less favourable terms
Lower credit limits
Refusal of credit
If you wish to avoid one or more of the above out comes, you should be trying to keep your credit card debt under control. One way to do this is to simply stop using them. Discipline yourself, or if this is too difficult, take the credit cards that you are using, out of your wallet or purse, so that you cannot give in to the temptation of using them. This way, the amounts you pay back will start to reduce your outstanding balance and you will get things back under control.
Another thing you should be making sure that you are doing is repaying more than the minimum repayment on your monthly bill. Many cards allow you to repay just the interest, and if you are doing this, it means that you are repaying none of the actual outstanding balance each month so even if you stop using the credit card, you will not be paying them off. You are simply servicing the debt. You should make sure that you are paying back the credit card balance over a reasonable period.
As the cost of going to college continues to increase, many students make the mistake of taking on debt they can’t handle. They may choose to take out credit cards or student loans, and end up with a lifetime of bad credit. Most students in college don’t have the income to make payments on these loans, and it is easy to default on your payments in a situation like this.
Statistics show that many college students make the mistake of opening multiple accounts while they’re still in school. Some are under the false impression that once they graduate, a high paying job will be waiting for them which will allow them to pay off their debts in a reasonable time period. Many college students fail to realize that these jobs may be difficult to find after they graduate, and they will have to find work in order to make their loan payments immediately after graduation.
Many lending companies are also part of the problem. Banks and credit card companies rush to loan college students money, and many of these young people are inexperienced with handling their personal finances. By giving these young people loans, many lending companies are making the problems worse. Some of these students end up with bad credit, and may have a hard time applying for a mortgage. There are a number of reasons why lending institutions target young people more than other segments of the population.
Many lenders see college students as being future income earners, and this is true. Statistics shows that it will take students at least 10 years to pay off their student loans after graduation, and this doesn’t include credit cards or other types of loans. By getting these students into debt early, lending companies insure that they will earn residual income for many years to come. Many colleges add to the problem by pushing students into loans instead of offering them grants.
One thing college students can do to avoid bad credit is to simply not borrow money. Use a debit card instead of a credit card to make purchases. Get a part time job to help pay for the cost of your books, and look for grants and scholarships to pay for your tuition. Students should only get a loan when they absolutely need it. It should be used only as a last resort. It is critical that students avoid putting themselves in a situation where they could end up in heavy debt. Heavy debt is the primary thing which can lead to bad credit.
By doing this, you will greatly reduce the amount you borrow in order to go to school. The less you borrow, the easy it will be to pay it off once you graduate. It may take you time to get a high paying job which is in your field, and you don’t want to struggle with loan payments every month. When you borrow at lot, you increase the chances of defaulting on your payments and ruining your credit. If you find yourself in a situation where you are having trouble making payments, seek help as soon as possible.
Parents who have children in college should talk to them about personal finance. If possible, parents should try to send some money to their children to help them pay for their books. At the same time, parents should also encourage their children to get a part time job. Most parents don’t have the money to pay for the cost of education, but if parents work together with their children, they should be able to graduate from college with little or no debt.
Credit Card Debt Reduction – 3 Tips To Lowering Credit Card Debt
Credit card debt can be reduced through lower rates or negotiating for reduced balances. With reduced interest, you can pay off the principal quicker with the same monthly payment. The other approach is debt settlement, which eliminates part of your debt at the cost of your credit score.
1. Transfer Balances
Credit card companies are always offering introductory deals, such as 0% on transfers. Usually such offers last for several months, giving you the chance to make sizeable payments on your principal.
If you have several credit cards, choose to transfer the account with the smallest amount. Pay off that account, then take that cards monthly payment and apply it to your next lowest balance. Soon you will be creating a snowball affect, swiftly lowering your debt. Make sure to close paid off accounts to raise your credit score and keep from adding to your debt.
2. Negotiate Lower Rates
Credit card companies are also willing to lower rates. You can try to do this on your own, but you will have more success with a debt management company. For a monthly fee, they will lower rates with credit card companies and handle your monthly payments.
Debt management plans can affect your credit temporarily if your creditors report delayed or reduced payments. This might prevent you from opening new accounts for a year or more. However, with such plans you can be out of short term debt in less than five years with a much better credit score.
3. Settle For Reduction In Debt
Debt negotiation is the most drastic step to lower your credit card debt since it has long term affects on your credit. A debt negotiation company can settle some of your debt with creditors. Lenders will then report the reduced amount to the credit reporting agencies, which will keep it on your record for seven years. Debt negotiation is similar to bankruptcy and can prevent you from qualifying for conventional credit for a couple of years.
Reducing your credit card debt will have long term benefits for you. Less credit means better rates when you do want to apply for financing, especially with a home or car purchase. No matter which option you choose, research companies carefully and compare their services and fees.
Bad Credit? Get A Payday Cash Advance Loan With No Credit Check
Do you have bad credit history? Even with a recent bankruptcy or foreclosure, if you are in need of some emergency cash, you may want to consider getting a payday loan. The benefits are you get the cash fast and it is an easy process, compared to applying for a new personal loan. You can apply for free with payday loan companies online.
How Payday Loans Work – A payday loan or cash advance company will do no credit checks to qualify you for the loan. The loan is based on your ability to repay the loan. This can be verified by a check stub from your employer and a verified bank account.
2 Kinds of Payday Loans – There are basically two kinds of payday or cash advance loans online. There are faxless or paperless payday loans where there is no faxing necessary to qualify for the loan and there are cash advance loans where you will need to fax in documents to verify your income.
The Disadvantage of Payday Loans – The only disadvantage to using a payday loan, is that, compared to credit cards, the interest rate is much higher. That is because the loan is considered a high risk, short term loan. It has different properties than a credit card.
How The Loan Is Paid – The payday loan will be payed back in a single payment. The payment will be set up and deducted from your checking account automatically on the due date. You will want to make sure the funds are there, because there would be a hefty fee if the debit is rejected from your account.
Make Sure To Compare Rates – Compare payday loan companies fees and make sure that you are paying the lowest fees you can for this short term loan, and interest accrues everyday, so make sure you only use the loan for the time you need.
With a recent bankruptcy or foreclosure, or just bad credit, it can be really difficult to get approved for a credit card or personal loan. Consider a cash advance loan online. They are convenient and can save you the hassle of applying for a new credit card. You can get the cash quick.