It’s difficult to not end up in credit card debt. One day you can be out shopping, going to stores that you’ve been itching to visit for weeks and purchasing your favourite items with just one swipe of your credit card. Then before you know it, you have pushed your credit card to its limit, to the point where you can’t exactly recall how it occurred.
How do you know your Credit Card Debt has reached its limit?
There is no way to know when your credit card debt is becoming out of hand. The company that provided you with your credit card are not going to give you a heads up when you start to spend more than you can actually afford, which is why you should know the different warning signs.
You’re Late or Missing Payments
If your payments towards your credit cards become unreasonably expensive, you are in a bad position. Late payments can raise the sum you need to pay to get you up to speed and can negatively have an effect on your credit rating. Missing your credit card payments altogether will ultimately make your issue worse. When you miss a couple of payments, the interest you get charged will only surge upwards and catching up with your credit card payments will be almost unachievable. The minute it becomes difficult to make the minimum payments towards your credit card, that is the point you need to make drastic changes to your spending habits.
You’re finding it hard to make the Minimum Payment
Another sign that shows your credit card debt has reached its limit is when you are only capable of paying the minimum amount towards your credit card. The term ‘minimum payments’ is the lowest amount you can pay towards your credit card without your account tumbling into the red zone. If you find it difficult to pay more than the minimum, yet you continue to use your credit card, you are just pushing yourself further into debt.
Your card is Maxed Out
If your credit card is maxed out, that is an indication that you haven’t been forking out the required funds every month. Maxed out credit cards only make your situation worse and will make it harder for you to pay off your credit card balance. Also, on the off chance that you don’t have an emergency fund, you won’t be able to put money towards your savings in case of an emergency – like having a maxed out credit card.
Your Credit Rating Lowers
Credit ratings are the first pieces of information a lender will look into if you were applying for a mortgage or a loan. If your credit rating is poor, you will be less likely to receive approval. Credit ratings are also used to measure your reliability – to make sure that they can trust you to make the repayments without making a default. If your credit rating is lowering – even if you are managing to make the payments on time – it is an indication that your credit card debt is worse than you anticipated.
However, not everything is all doom and gloom. There are several ways that you can get out of debt and rebuild your credit rating as you do so.
New Credit Card Applications are rejected
It’s possible that credit card providers have the capability to know when your credit card debt is getting out of control before you do. If you apply for a new credit card but your application gets turned down, it’s probably due to your high credit card balance. If this is the reason, it’s an indication that you have to get control over spending and begin handling your credit card debt before it becomes almost impossible to pay back.
Tip: If your application gets turned down, always check your mail as the card provider who rejected your application may clarify on the letter the reason/s why.
You’re making everyday Credit Card purchases
If you’re using a credit card to purchase everyday necessities, then not only are you crazy with your credit card, but it is an indication of greater financial problems. On the off chance that you keep using your credit card to purchase everyday items, you will ultimately leave yourself with no money in the long run. You will need to roll out huge improvements to stop yourself from totally suffocating by paying off debtors.
Ways to get on top of your Credit Card Debt
When you have finally come to terms that you have gone off the deep end with your credit card debt, it is about time that you do something about it. Overlooking the seriousness of your credit card debt will make it harder for you to take control of your finances, which is why we have suggested a few ways that you can rid your credit card debt once and for all.
Cut down on your Spending
When you accept the fact that your credit card has reached its limit, it’s time to make some changes starting with your spending. You have spent a good bit of time using your credit card to make purchases, but what you haven’t realised is that you have been piling up your debt. It’s time to quit fooling around and take control of your finances.
Start to focus on items that you need and cut down on your excessive spending i.e. stop spending money on things that you don’t need or can’t afford. Now, that doesn’t mean that you have to stop buying luxury items completely – it’s always good to treat yourself once in a while – but you will have to make a few sacrifices if you want to clear your credit card debt. Keep in mind that the reason you are doing this is to better your finances and have more security in the long run.
Budget, Budget, Buuuudget!
The one recommendation we always make to people who want to get a good grip on their finances is to plan a monthly budget. This will let you see how much money you have coming in, what you owe and how much you will have left over to cover bills and other expenses.
Begin, by writing a list of all your credit cards, list their balances, the interest rate and the minimum payment for that card. On the off chance that your credit card has passed the payment due date, record the sum that you have to pay in order to get caught up. After you have done that, note down your income and identify the amount of money you have coming in and where it is going. By doing this you can figure out how much money you have left over to clear your credit card debt after you have paid your bills.
Bin the Credit Card
If you find that you are a little ‘credit card crazy’, it would be wise for you to get rid of your credit card all together. Using your credit card to make purchases while being in debt is only going to make your situation worse. You can freeze your credit card, or even better, cut them up. It’s known for people to go the extra mile and cut up their credit cards, so they can concentrate on clearing their debt. Remember, the higher your credit card balances are, the more difficult it will be to pay off the debt.
Should you stop using Credit Cards entirely?
The majority of people choose to never use credit cards again after they have gone through a debt crisis, but there are many people who pay off their debt and continue to use credit cards. Now, that’s not a bad thing. Credit cards themselves aren’t awful, but it’s the way you use them that can throw you into a financial crisis.
If you wish to continue using your credit card, only spend what you can afford. If you plan on buying something that may hurt your bank balance, then don’t buy it. Also, instead of making the minimum payments each month, start paying in full. This will help you to get a good grip on your finances instead of falling into debt.
What you can do!
If you are finding it hard to get on top of your credit card debt, then get in touch with Basik Money today on 0330 041 2299. You can get free impartial advice from one of our qualified advisors who can help you take the best course of action.