According to Bank of America, almost 60% of American consumers are in credit card debt in different levels. It shows American like utilizing credit in modern transaction but not all of us are wise borrowers who manage credit to support our life instead of depending on it. So how to pay off debt or what is a proper debt-free solution becomes a notable essential thing for everyone.
In fact, the debt happens when you can’t handle some type of credit cards or loan balancing with purchases. You spend credit more than your saving or even your net income. As consequences, you are not able to control your finance by due payment date, and you have to carry the balance month to month. That is the moment, credit companies charge you a hight interest rate on your remaining balance and many kind of penalty fees. As far as we can see, the core problem is our credit behavior which is to determine how we use money in this month and which income sources support us to pay off the whole balance. In a case, you can’t diversify the income, optimizing the spending things and credit responsibility will absolutely your first choice.
In that situation, you ought to not max your credit card limit since this increases your balance and hurts your credit score quickly. The best secure practice is to utilize 10% – 20% of your credit limit in a month and the total credit balance is less than 20% of your net income. Asking other source such as friends, parents or relatives if you need for free-interest debt.
When it comes to credit responsibility, 3 things are must known: minimum payment trap, payment history and interest rate. If you want to rip off your debt as soon as possible, you have to forget the term of minimum payment from credit companies because you are still charged in a high rate on your left balance. Let’s make a 6-month-plan less purchasing, and ‘spend’ more money to pay off debt, you will see your freedom will comeback. After you try to pay more for your debt, practicing this regularly assists you proceed the plan faster and also benefits your credit score. Remember paying your balance before the due date to prevent from late payment fee and lessen credit score.
Should you are carrying a balance, you should update the interest rate currently. The credit company can change your rate suddenly due to the policy, your credit score, etc. To catch up with that, you need to read all mail or email from creditors and respond them if this change isn’t applied to you. Another way handling the interest is to switch to lower APR accounts by balance transfer tactics. Ideally, you got a good credit score, you can apply to some interest-free credit cards from banks to get this privilege in 12 – 18 months. 0% APR cards buy you time to pay off debt piece by piece without the cost for interest.
Related story: What is 0% APR credit card?
In conclusion, dealing with debt is to change your credit utilizing ways toward a responsible road. Practicing it monthly basis gives you a hand to become a “free man” a lot faster. Good luck!