What are the origins of this fun-filled festive custom?
Make a detailed list of all the credit cards you have (even if you don't currently use them). Write down balances, interest rates, and minimum payments. Being aware of your financial situation will help you calculate potential tax liabilities and plan to reduce your debt effectively.
If you are accumulating debt or using too much against your credit limit, it will negatively impact your score and make it more challenging to do things like buy a house or secure a loan. Be sure to balance usage with payoffs to avoid negative marks on your report.
To better understand your overall financial health, it's important to collect all of your credit statements so you know what outstanding debts you have and applicable interest rates and associated fees.
Calculating your credit card debt will allow you to assess your financial obligations and plan for repayment. Additionally, it's important for tax purposes as it can influence eligibility for certain deductions and credits.
The debt snowball method involves paying down the minimum amount on all of your credit cards except the card with the lowest balance. The debt avalanche method works similarly, but instead of targeting your lowest balance first, you focus on the card with the highest interest rate.
It's important to create a budget as it will help you track your income and expenses. This means that you will know what's left over to pay down credit card debt and ultimately relieve and alleviate more (if not all) of your financial burden.
Cutting back on unnecessary spending means that you'll have more money to repay debt and have a better financial outlook in general.
Debt consolidation means taking out a new loan or applying for a new credit card to pay off other existing loans or credit cards. By combining multiple debts into one, larger loan, you may be able to obtain more favorable payoff terms.
By working with a credit counseling agency, you can likely create a structured repayment plan that consolidates multiple payments into one monthly credit card payment. With these plans you might also be able to waive fees, making it easier to pay off.
Debt settlement involves negotiating with creditors to pay a lump sum that is less than the total amount owed. While this option can significantly reduce your debt, it may result in taxable income for the forgiven debt amount, leading to potential tax liabilities.
It's important to always have an emergency fund or extra money that's put away for times you really need something. Try to use your emergency fund money instead of putting large purchases onto a credit card.
Impulse shopping can quickly add debt to your credit card. Some tips to avoid it include not shopping when you're emotional, waiting a day (or longer) after deciding you want or need something, and going with a plan in mind of what you'll be buying and bringing only that amount of money in cash.
To avoid missed payments and subsequent associated late fees, always try to have your credit payments automated. Take out the guesswork in having to remember when payments are due.
Regularly checking and reviewing your credit reports will mean that you are not only aware of what needs to be addressed but you can also catch mistakes that might occur. Be sure that the steps you're taking are impactful ones.
Another way to offset debt is to build your financial wellness and increase your income. Many people take on an extra part-time job or even a side hustle to bring in extra money. This money can help pay down debts quicker.
When you hit important debt repayment goals, know that it's okay to reward yourself. Be smart though, don't go buy something else expensive on your credit card that you'll then have to pay off. But a nice coffee or sweet treat can be an excellent reward to help you stay motivated.
Credit card debt is not only stressful, but it's also multifaceted. There is so much more to know about debt, and these next slides aim to share a few bits of information at a high level.
A great first step to develop a healthy relationship with money is to create a plan focused on budgeting, saving, and investing. Aim to set realistic goals and prioritize needs over wants. Remember how stressful debt was or would be and aim to avoid it.
To stay motivated along the way, celebrate milestones. If you pay off a card or even make a small yet impactful payment towards your debt, be sure to acknowledge this and how important even the small steps are.
Learning from your past financial mistakes is a very important skill. It involves assessing what you did previously, how challenging it was, and how stressful things were as well as how to avoid this in the future.
Unfortunately, there are supposed debt relief companies out there who charge high upfront fees and promise to eliminate your debt. However, no real service is delivered. Be sure to always verify the legitimacy or these companies by checking reviews and credentials.
A credit score is the prediction of how likely you are to pay a loan back on time based on information from your credit reports. The higher the score, the more likely you are to get approved for loans and for better rates
Credit card use has both positive and negative effects on your credit score. Some benefits are reward incentives such as cashback or points that can be used towards other future purchases or to pay down the balance you already have. Using credit debt wisely will help you build a credit score.
If at all possible, seek a credit counselor or financial advisor before your debt becomes unmanageable or you miss payments. Debt can be debilitating so it's important to seek help from those who know how to be of assistance.
Sources: (Investopedia) (Yahoo! Finance) (Equifax) (Ramsey)
See also: Essential financial guidelines everyone should be familiar with
Some lenders may be willing to negotiate with borrowers to offer relief options and minimize the lender's financial loss. Common negotiation strategies include asking for a reduced interest rate, creating a repayment plan, and considering debt consolidation.
Credit debt is an unsecured, or not backed by collateral, type of liability. Borrowers accumulate debt by opening credit card accounts that each have different terms and credit limits. Credit accounts are all tracked by credit bureaus.
Taking action on your debt is important. One way to do so is to contact the issuer of your credit cards. Oftentimes, credit card companies will have options such as hardship programs or lower interest rates that they can offer to those who communicate the need.
Credit card debt is something that many of us face every day. It's a daunting challenge that can negatively impact all areas of our life. However, if you take the time to understand it and address it head on then you can become more financially stable. From what is credit card debt to budgeting and even to debt consolidation options, this go-to guide will give you the tools you need to be successful, happy, and debt-free. Embrace the journey to financial freedom and take your first steps by reading this guide.
Curious how you can minimize or eliminate credit card debt? Click through now.
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Credit card debt is something that many of us face every day. It's a daunting challenge that can negatively impact all areas of our life. However, if you take the time to understand it and address it head on then you can become more financially stable. From what is credit card debt to budgeting and even to debt consolidation options, this go-to guide will give you the tools you need to be successful, happy, and debt-free. Embrace the journey to financial freedom and take your first steps by reading this guide.
Curious how you can minimize or eliminate credit card debt? Click through now.