Paying off Credit Card Debt

Credit card debt is one of the biggest problems today for people in terms of financial stability. While paying the debt off is important, there are some mistakes that people make that could seriously damage both their credit score and financial future. The following are some of the most common mistakes, and how to avoid them.

Maybe the biggest mistake people make when trying to eliminate their credit card debt is to get new cards to pay off their old debt. This is harmful in two ways. First, it may seem like no big deal to you, but credit agencies keep an eye on this sort of activity, and having too many cards can negatively affect your credit score. A low credit score can do anything from increase your insurance rates to make it hard to get loans for things like new cars or homes. Secondly, it can be incredibly hard to get out of debt when you are constantly increasing the amount of money you have available on credit. You may go in with the best of intentions, but many people often find themselves going further and further into debt with the more cards they acquire.

Instead of getting new cards, try eliminating some of your other debt. Clip coupons, downgrade your cable package, or whatever else you can think of to lower your monthly bills. Take whatever you save and apply that towards your credit card bills every month. It may be hard for a while to do without things you have become accustomed to, but it will be easier in the long run than drowning in debt.

Another huge mistake people make when trying to eliminate their credit card debt is continuing to make big purchases with them while they are actively trying to pay the cards off. When considering a purchase, a good rule of thumb is to ask yourself if you can afford to pay for whatever it is in cash. If not, then it is usually best not to pay for it with a credit card either, but instead to wait until you are more financially secure. Continually increasing your balance is only going to make it harder to pay off.

On the other hand, it can also be a bad idea to cut the card up and not use it at all. It is not unheard of for credit card companies to cut off the card or dramatically increase the interest rate if it is not used for a long period of time and then paid off fully. It is generally a good idea to put one or two small charges a month on the card, as long as you are sure you have the money to cover them. No big screen televisions or cars, but using it when you go out to dinner will ensure that the card remains active while not increasing your debt too much.

Another mistake that people usually do not give much thought to is trying to pay off too much debt at one time. While eliminating the debt is important, it should not be done at the expense of other bills. It is important to create a budget that lines out how much you can afford to pay on it each month. Unless you get a surplus of money one month or get rid of other bills, stick to the budget to make sure you do not overextend yourself financially. There is no point in getting rid of the credit card debt if it gets you behind on your mortgage or car payment.

Credit card debt can ruin you financially, but avoiding these mistakes will go a long way in ensuring that your credit score does not take too hard of a hit. A little common sense and planning can mean the difference between bankruptcy or a debt free life.