You May Never Pay Off Credit Cards If You Don’t Read This
A credit card can be an invaluable lifeline when you need quick access to funds that aren’t sitting in your bank account. Unfortunately, they can also become a ball and chain from which some families are never quite able to unshackle themselves. When faced with the prospect of credit card debt our most common instinct is to bury our heads in the sand and hope that the issue rectifies itself.
However, this is the easiest way to become bogged down in a quagmire of extortionate interest rates and penalties. If you want to be able to reap the benefits of credit cards without incurring the risks and caveats that come with them, a proactive approach is necessary. You need to own your debt and know how to manage it effectively. And part of that is identifying where others have gone wrong and avoiding the pitfalls accordingly.
With that in mind, here are five reasons why most people never pay off their credit cards…
Why Pay Off Credit Cards When The Monthly Payments Are So Low
It’s so easy to fall into the trap of thinking, “Wow! I get to borrow that much and I only need to pay this little a month?”. Yet, while this mentality is understandably appealing it is ultimately misleading. Of course credit card companies want you to set those repayments to the minimum amount. They know that this will prolong the debt and result in more interest for them over time.
Lower monthly payments can certainly ease the cash flow in your household finances. However, they can also barely cover the interest on your credit card meaning that much less of the debt is paid off every month.
If you regularly check your credit card statements and are regularly bamboozled by the figure on the page, it’s entirely possible that you’re unaware just how much of your repayment is being wasted on interest
The easiest way to rectify this is by moving the debt to a different card that has a lower interest rate. There will usually be a fee to do this but you’ll likely find that the fee pales in comparison to what you save on interest over a period of years.
Alternatively, if you have poor credit and / or can’t find a card with a better rate of interest, you may want to consider increasing your monthly repayments and adjusting your household budget accordingly. This might mean tightening your belt in a few places, but it’ll likely be worth it for the prospect of being debt free!
If You Keep Borrowing, You Will Never Pay Off Credit Cards
When credit is abundant and readily available, it’s easy to think of it as free money. And despite all the efforts made to legislate banks and lenders, many credit card ads kind of make it look that way, too. Which is why it’s so important to think twice before opening up a new line of credit. Even a monthly repayment figure that looks eminently reasonable on its own can be the straw that breaks the back of your household finances.
If you’re relying on credit cards rather than cash or your debit card to make everyday purchases, or taking out new cards to make ends meet, you’re only digging a deeper hole for yourself. A hole that will take longer to emerge from every time you use your cards.
Wherever possible, try and pay off a debt in its entirety before you take on a new one.
Credit Card Fees Are Included In Your Overall Debt
When you incur fees on a credit card they are enfolded into the overall debt on your card. Thus, while it could be considered a mercy that you don’t have to pay them upfront, it can make paying off your card all the more challenging by absorbing more of your monthly payments so that you put less of a dent in the overall debt.
Late fees, transaction fees, fees for going over your credit limit and annual fees can all add significantly to your debt and make it harder to pay off your cards. Again, this is much more likely to occur when you bury your head in the sand. Instead, try opening up a line of communication with your lender and asking if they can help with waiving any of your fees (there’s really no harm in asking). Make sure your repayments are made on time and orchestrate your finances to make sure there’s enough in your account to cover them.
With a little diligence you may be surprised by just how avoidable most fees are.
They Pay Off Credit Cards With Other Credit Cards
Typically a credit card company will not allow you to pay off your credit card with another credit card. As keen as they are to get their money back, they will usually face large processing fees by carrying out these kinds of transactions.
However, there are workarounds. Some get a cash advance on one card to pay off another while others move the debt from one card onto the next. Neither is particularly advantageous and can only dig you deeper into a debt hole. Especially considering that balance transfers may be charged at a different rate of interest than purchases.
Their Credit Cards Have Become Too Complicated To Manage
A combination of the above can make credit card debts extremely complicated to manage. When households have numerous credit cards in use, each with repayments coming out on a different day and each at a different rate of interest, it can not only make handling debts more difficult it can also increase the psychological burden associated with them.
For this reason, many find consolidation loans an advantageous way to manage their credit card debts. These are beneficial for a number of reasons. Firstly, they take the guesswork out of balancing different interest rates. Credit card debts are replaced with a single debt with a single monthly repayment and a single rate of interest. So while they will likely be higher than any individual repayment, they’re much easier to manage.
Secondly, because they replace existing debts, they can even improve your credit score. However, we strongly recommend paying off a consolidation loan before accepting a new line of credit.
Otherwise you could end up right back where you started.
5 Reasons People Never Pay Off Their Credit Card Debt
- Five Reasons People Never Pay Off Their Credit Card Debt
Five Reasons People Never Pay Off Their Credit Card DebtA credit card can be an invaluable lifeline when you need quick access to funds that aren’t sitting in your bank account. Unfortunately, they can also become a ball and chain from which some families are never quite able to unshackle themselves. When faced with the prospect of credit card debt our most common instinct is to bury our heads in the sand and hope that the issue rectifies itself.