If you are hoping to get yourself out of credit card debt or if you want to avoid falling into debt in the first place, the most important thing you can do is to change the way you think about credit cards. One of the primary causes of out of control credit card debt is simply the fundamental way that people think about credit cards. Many people seem to think of their credit cards and credit lines as assets or equity that they can utilize at their leisure.
If you do find yourself having to carry a balance on your credit card, you should make every effort possible to pay more than just the minimum payment each month. If you only pay the minimum amount, you are destined to be in debt for many years to come. Even a small balance of less than $5,000 can take well over 40 years to pay off if you only make the minimum payment.
This is a no-brainer. But, if you are in debt, stop making new charges on your card. You really need to make a conscious effort to break the cycle of spending. This can be very difficult for some people, particularly if you have become used to spending money every time the urge struck you. Impulse shopping is the biggest problem for most people when it comes to overspending. So, make lists when you head out and resist the temptation to purchase something that isn’t on the list.
You might also want to consider getting rid of a few credit cards. The average American is carrying around eight credit cards. Yet, you really only need to have two credit cards: one for making the purchases that you pay off each month and one for using in case of an emergency. If you have a business, you might have a second card for this purpose as well. Of course, since you are going to pay off the credit card each month, you might as well get a reward credit card so you can make some money off of your spending.
Keep in mind that many financial experts feel your debt to income ratio should be 25%. So, if you make $10,000 per year, your total debt shouldn’t be more than $2,500. Some experts, however, feel this should be kept to less than 15%. If your debt is more, you should seriously re-evaluate your situation and make some changes.
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