While checking class action rebates may get you to free up extra money each month, it’s taking a look at your overall finances that will really give you a chance to put all under a microscope and figure out how you can make the necessary cuts you need to get ahead and put more towards paying back debt each month. Taking a look at last month’s credit or debit card statement is a good way to figure out exactly how much is going out each month, then trying to put together a budget that you can use to make sure you have the sufficient funds for set aside for bills, not to mention needed spending on food, gas, and an adequate amount of entertainment. So, you can do just that, it’s good to make sure you’re not having any credit card mistakes that will cause you lose money.
Not First Checking Your Credit Report
You never know these days who might have your information, whether your card info gets scammed at the gas pump swipe, or hacked company-wide from a retail store, it’s good to check your credit report at least once a year to make sure that everything is accurate at least, and you can get a free copy of your report each year from the major bureaus. Your score will not be included for free, but now monthly credit card statements include your score, so you can see month over month to ensure it’s on the right track.
Using the Wrong Card
There virtually endless amounts of credit cards you can choose from, probably getting mailings just about everyday hyping up their card with “silver”, “black”, or “gold” to make it sound exclusive, but the truth is, if you can get one without an annual fee, a low interest rates, and with rewards, you could be in a good shape. Especially since you should pay off the statement balances each month, interest rate could be second tier to rewards, which you can earn miles, points, and even cashback dollars just by making the same purchases you would be making anyways, so not using one of these cards would be like leaving free money on the table.
Carrying Over a Balance
Credit cards offer the chance to pay back with a grace period, not having your payments made in the month due until next month, but if you are not able to pay back the full statement balance by the due date you will start to get charged, and depending on the card, could be upwards of 16%, and depending on the balance, could be quite significant.
Making the Minimum Payment
While sure, making the minimum payment will satisfy your account in good standing, but that balance you are carrying over will continue to collect interest until paid, so in order to get out, and stay out of debt, you need to make the largest payments you can afford until the balance is gone, and going forward, making sure the full statement balance is paid each month. Making payments any lower could add years to paying off, not to mention decades just by making the minimum payment, so you can see how little that goes to chip away at your balance.
Not Taking Advantage of a Balance Transfer
If you are carrying over a balance and have a high interest rate, most of your monthly payment could go towards interest, so in order to save more money in the long run and get out of debt, a balance transfer could make sense. There are plenty of offers for say, 0% for 18 months, where you can have an interest-free period to pay back. While there will be transfer fees around 3-5% of the transfer balance, those few hundred dollars could probably be immediately forgotten when you think of all the interest you could be saving on for years to come.
When in Doubt, Try a Consolidation Loan
Just making payments each month doesn’t really give a payoff plan on a credit card balance, so it might be a good idea to take out a consolidation loan, whether that’s taking equity out of your home, or taking out a personal loan, that will give you’re a set amount of time to pay back. Sure, the interest rates could still be higher, but will likely be still much lower than what you would pay every month with your credit card, and then at least there will finally be an end in sight and move on debt-free on your quest for financial freedom.