The use of credit cards has normalized in our society. It is more common to see people paying for a coffee with a credit card than a ticket. This bad habit is reflected in the financial health of consumers.
According to a study, the credit card debt in the United States has exceeded $1 trillion for the first time in history.
An estimated 200 million people in the United States use credit cards. More than half of them drag their debt month after month.
According to a report published in December 2017 by the federal agency Consumer Financial Protection Bureau, the total cost of the average annual interest rate (APR) of a credit card in the United States is 17.2%.
Three Steps to Eliminate Credit Card Debt
Before going into detail, I want you to be aware of several things:
It probably took you several years, or at least months, to end up in debt up to your neck. It’s going to take time to pay the debts.
Leave aside the victim mentality. You ended up in this situation because you decided to ask for a credit card, use it, and sign a promise to pay off your debt with each purchase. You must honor your word and pay it off. Nobody else will do it for you.
Do not stand by with your hands waiting “for the bank to offer you an arrangement.” The business for companies that extend credit is that you remain indebted for life. You will never get out of debt if you pay only the minimum payment. On the contrary, with the interest they charge, it will go up without control.
Identify at the root the reason, the bad habit, or the myth that led you to use credit cards
- You use the card
- You do not earn enough, and with the complete cards, your expenses
- You want to accumulate points to obtain prizes or miles
- You are a compulsive person, and you buy without planning the expenses
- You think that using a credit card will help you keep a good credit score
- They are your emergency fund
- You are served to hide purchases from your partner
- You have an addiction to shopping, beverages, casinos, etc., and you use them to keep your vice
Be aware that getting into debt will not solve any of these problems
For more commercials you have seen on television about the supposed privileges of having a credit card, open your eyes and see reality. Debts for your credit cards only cause you more problems. Having them allows you to buy the things you cannot afford.
Credit cards are not the solution to supplement your income. Neither is the solution to go on a trip. Those miles or points you think you are earning will end up paying very high interest if you fall behind in your payments or drag the debt.
If you want to travel, pay all your debts and save for a vacation. Here you can read an article that I wrote about it.
It would be best if you eliminated from your mind the belief that the credit card is your emergency fund or your escape to make purchases on the sly. And you must also stop its use if you are financing vices with them.
Note that most credit card users, 60% to be exact, feel trapped in debt they cannot get out of.
Use the “snowball” method to pay off your debts
The most effective system to eliminate your debts is the “snowball” method. This system allows you to act with intensity, take advantage of the momentum you achieve when paying your first debt, and focus on delivering the next one.
Some people have paralysis by analysis and never take action to eliminate credit card debts. They think paying the debt with higher interest is better to save money.
In an ideal world, this is true. However, when you are in debt, you do not have much money to pay your debts. When you try to attack an immense amount first, you give up because you do not feel you are moving forward.
Instead of the interest rate, focus on paying the smallest first.
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