4. You can't pay your credit card balances in full each monthThe goal with credit cards should be to pay them off every month. When you only make the minimum monthly payments, most of the money is eaten up by interest and very little goes to paying the principal. Carrying a balance from month to month is costing you.
For example, let's say you owe $5,000 on a card at 17% interest with a minimum monthly payment of $100. If you can't afford to pay more than the minimum, you could be paying that bill for 27 years and the icing on the cake is that over the lifetime of the debt, you would have paid double the original amount because of interest charges.
If you can't pay your credit card in full each month, at least pay more than the minimum while keeping the balance as low as possible. You should never carry a balance of more than 30% of your credit limit on any one card or in total. (See also: The Fastest Method to Eliminate Credit Card Debt)5. You have to rob Peter to pay Paul
If you are constantly missing payments, paying things late, or using one credit card to pay another, you are on a high-speed train to financial disaster. Things will only get worse from here if you don't make some adjustments ? quick.
When you use your credit card to pay on other forms of consumer debt ? especially other credit cards ? you spend more money due to fees you incur. Most credit card, mortgage, and education lenders don't allow you to pay them directly using a credit card. You have to go through a third-party service or get a cash advance in order to pay with your card, and both of those options come with hefty fees.
Summary
The deeper you get into debt, the faster it mounts. If you find yourself in a situation where you are drowning in credit card balances, you need to take action. Step back, evaluate your situation, and make a plan.
- Develop a realistic budget and eliminate unnecessary spending. You've got to be brutal and savagely cut the things you don't need.
- Devise a debt elimination plan.
- This may require you to contact your lenders to renegotiate repayment terms,
- and you may have to find a way to increase your income.
- A few options for generating extra income include selling stuff you don't need or can't afford, getting a side gig, or even downsizing.
The point here is to regroup and take control of your debt instead of allowing it to control you.