Getting overloaded with credit card debt is both easy and dangerous. It can only take a few months of carrying a balance to see that interest start to pile up, and pretty soon, you’re lurching from debt to debt, trying to put out all the fires that are burning a hole in your credit rating.
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Never Pay Just the Minimum
If your minimum payment is more than your total balance, it’s time to stop using the card. Check the due date and see if you can pay twice the minimum now, then try to pay off the additional balance before the payment is due. This action will:
- Protect you from paying a fee
- Hopefully, protect you from having to pay interest
- Make it possible for you to use the card again
Another option is to make a payment each time you get a payment to bring down the balance as quickly as possible. For example, if you are an impulse shopper, don’t use your card for weekly purchases like groceries and sundries. Instead, take in cash and put things back when you’re out of money.
Don’t Put More On the Card Than You Have In The Bank
Another good option is never to put more on the card than you have in the bank. For example, if you need to make a $500 car payment and $600 available, you have $100 to cover the next expense. Put the expense on the card for the points or the miles, then go home and immediately pay off the total on the receipt. Make sure your bank doesn’t limit the number of payments you can make each month.
If you’ve ever been in severe credit card debt before, this habit can keep you mindful.
If You Must Carry a Balance Short Term, Watch Your Utilization Rate
According to the experts at SoFi, you may be able to improve your utilization rate with an” increase in your credit line” or by transferring debt to an unused card. The utilization rate refers to the space between what you owe and how much credit you qualify for. For example, if you have two cards with a top-out of $6,000 each and you owe $2,000 in total credit card debt, you’re at 33%. If all of that $2,000 in debt is on one card with a $2,500 limit, it will be harder on your score than if you can split the debt while you pay it off.
So how much credit card debt is too much? If you can’t pay it off each month, it’s time to make some changes in this economy.
Ignore the minimum payment on the bill. Watch that total balance owed. If you need to do a balance transfer, roll the debt and put away all the cards; go back to cash until the consolidated card is paid off. Any consolidation loan should be a heads-up that you are headed for trouble.
