Credit card debt is rising fast in our country. In November 2018, The New York Federal Reserve revealed that the credit card debt has risen by $36 billion in the US. It is quite obvious that you are one of those who have huge credit card debt. And, the report is also indicating that people are accumulating more credit card debt day by day, which is not good for their financial health.
Credit cards are becoming the most important tools in our daily financial life. Most people don’t prefer cash transactions; they use credit cards for every purchase.
Using credit cards randomly is becoming a habit for us. But this habit has a pitfall. It doesn’t let us stop purchasing items. We keep shopping with our credit cards beyond our affordability. But, when it comes to paying the bill, people either make the minimum payments or ignore the bills totally. Because, in most cases, the credit card bills are beyond their affordability.
As a result, they soon fall into credit card debts and welcome all the financial hassles in their life.
Warning signs that you have too much credit card debt
In most cases, people don’t realize that they have reached an utterly bad financial phase due to their huge debt. Some people even don’t realize that they are sinking into debt until their daily financial lives become difficult. Thus, you have to understand how much credit card debt is too much.
Here are some warning signs that you have too much credit card debt.
Skipping one credit card bill to pay another
It is not at all wise to skip your credit card payments. You should prioritize your credit card payments. Skipping the payment completely is something that you must avoid. If you find yourself struggling hard to find enough cash to make all your credit card payments, then you are already in huge debt. You shouldn’t accumulate more debt.
Charging is more than what you pay
In case you are charging a lot to your credit cards, you need to pay the bills on time. If you are only charging and not paying off your credit card bills, then you are drowning in credit card debt. Thus, do not leave this unattended as this could cause a severe debt situation.
You are only paying the minimum balance only
If you are paying only the interest, the balance continues to grow. Thus, you shouldn’t only make the minimum payments to the outstanding balance. Please pay the full amount and within time. If you can’t pay the full balance and you are only paying the minimum balance, then you are in the vicious cycle of credit card debt. You should get out of it as soon as possible. Otherwise, you will soon get the creditor’s calls.
Ignoring credit card statements
It is not at all advisable for you to ignore your credit card bills. You should realize that ignoring your bills will not at all help you as your debts will keep on increasing. If you have credit card debts, then it is best to tackle this debt before it gets out of control. If you are ignoring your credit card bills as it gives you a panic attack, then you are already sinking into debt.
Using credit cards to meet your fundamental needs
You should realize that your income should be at least sufficient enough to help you buy things that you need for your everyday use. These may be items like clothing, food, gas, etc. Buying things with credit cards and not paying the balance in full indicates that you are in credit card debt. If you are using multiple credit cards for basic things as your bank account is overdrawn, then you are in huge debt. If left unattended, this situation could lead to excessive credit card debts.
You are not making credit card bill payments
If you have started missing credit card bill payments and are not even making the minimum payments, then you are in debt trouble. You should find ways to repay all your outstanding debts so that you can get back to a normal financial life.
You are realizing that the paycheck is not sufficient
If you are unable to even live paycheck to paycheck as your debt has started consuming half of your monthly income, then you are in huge debt. You should take solid steps to get rid of your debts so that you can manage other household costs with your income.
How can you reduce your credit card debt?
When you use your credit card irresponsibly, you can come under a mountain of credit card debt that may get very difficult to eliminate.
But there are some ways you can reduce your credit card debt and also get out of it.
1. Consolidate your debts
You can take out a consolidation loan to repay all your outstanding balance. By doing so you just need to manage only the new loan. However, you shouldn’t miss a single payment for the new loan. Otherwise, you will be in debt again.
However, you may not be able to take out a loan at a lower interest rate since you have a low credit score due to huge debts. But you should try your best to find a consolidation loan that comes with a low-interest rate.
If you can’t get a loan with a favorable interest rate, then you can consolidate your debts by enrolling with a debt consolidation company. This way you can get rid of your credit card debts.
2. Repay the highest interest rate debt on your own
If you want to reduce your credit card debt fast, then you should attack the debts that have the highest interest. You can repay the highest interest debt by following the debt avalanche method.
In this method, you need to arrange your debts from the highest to lowest interest order. Now, you need to make larger payments to the highest interest debt while making minimum payments to the other debts. Keep making large payments until the debt is paid off.
Once you repay the highest interest debt, target the second-highest interest debt and make a large payment toward it while making minimum payments to the other debts.
Follow this method until all your debts are paid off.
However, to follow this debt repayment method, you should have a good income. So, before following this method, try to increase your income as much as possible so that you can make bigger payments to the highest interest debt.
3. Settle your debts
You can also settle your credit card debt through a debt settlement company. You just need to enroll in the settlement program. The rest will be taken care of by the settlement company. After a certain time, you will be debt-free.
Lastly, to avoid further credit card debts, you need to build an emergency fund. Because, when emergency situations arise, you may need a lot of money all at once. If you do not have an emergency fund, then you will have to either use your credit card or take someone else’s help. In maximum cases, you will be forced to use your credit cards to pay for such emergencies. These debts will be very difficult to pay off as your budget will already be stretched. So, after getting rid of your current debts, practice good financial habits so that you can build an emergency fund and avoid credit cards for your basic needs. If you can incorporate good financial habits, you do not have to drown in debt and seek debt relief.