Is your credit card debt out of control? Find out by answering 4 simple questions
Over one-third of American households carry their credit card balances forward every month, according to the National Foundation for Credit Counseling. It’s no wonder that getting out of debt is the third most common goal among savers who took the America Saves pledge to save money, reduce debt, and build wealth.
But how do you know if you’re in credit card trouble? Start off by answering the following questions:
- Can you only afford to make minimum payments on your credit cards?
- Do you worry about finding the money to make monthly car payments?
- Do you borrow money to pay off old debts?
- Have you used a home equity loan to refinance credit card debts, then run up new revolving balances on your cards?
If you answered “yes” to any of those questions, then you probably need to get your debt under control. Easier said than done, right? Well, let America Saves help with these four steps:
Step 1: Stop borrowing
The first step to getting out of credit card debt is to stop borrowing. The average U.S. household has over $15,000 is credit card debt. Making just the minimum payment, that amount could take an incredible three decades to pay off, costing over $20,000 in additional interest. To avoid a similar pile of debt, or to climb out of it, it’s time to stop borrowing and make more than the minimum payments each month.
Step 2: Make a budget
Stop spending more than you earn by making a budget to ensure there is more money coming in that going out. Keep a careful record of all (and we mean all) of your spending for a month. You may be surprised to learn how much you are spending on dining out or impulse purchases. One method is to save all your bills and receipts over the month and stack them into categories like “utilities” and “groceries.” Or download our free budgeting worksheet here.
Step 3: Make a credit card debt reduction plan
You’re far more likely to successfully reduce your debt if you have a plan in place. Let us help you create that plan with our America Saves Pledge. Set a monthly debt reduction goal, and make a commitment to yourself to save here. Then count on us to keep you motivated with information, advice, tips, and reminders to help you reach your goal.
If you have debts on more than one credit card, either pay off the card with the highest interest rate first and work your way down to the card with the lowest rate, or pay off the smallest loan first and work your way up to the largest.
Step 4: Don’t Overspend
Once you’ve paid off your debts, don’t give in to the temptation to start over-spending again. Instead, take the money you were paying each month on your debts and begin to save it. That will give you a financial cushion the next time an emergency strikes. Learn more about reducing your spending here.
Looking for more information about credit and debt? Learn how to raise your credit score in less than a year here.
Is your debt out of control? Find out by answering 4 simple Qs from @AmericaSaves: http://bit.ly/2acsKkv
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- Written by Madeline Daniels
- Category: Blog
- Published: 20 July 2016