6 Things to Do If Your Credit Card Balances Are Creeping Up

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About half of all Americans use their credit cards strictly as a method of payment, avoiding interest charges by paying each statement balance in full. The other half will frequently (or always) carry a balance on their credit cards. And while most credit card users will tell themselves that they have their debt under control, some will eventually become worried when their balances keep growing.

Since it’s considered unsecured debt, credit card interest rates are usually higher than other types of financing such as car loans and mortgages. And since credit card interest payments are never tax-deductible, letting your balance grow can be extremely costly. Furthermore, having a high credit card balance will raise your debt-to-credit ratio, and can hurt your credit score. With a lower credit score, you will receive less favorable interest rates when applying for other financing. Therefore, it’s vital that you control your credit card balances before they begin to control your personal finances. (You can see where you credit stands by viewing your two free credit scores, updated every 14 days, on Credit.com.) 

If your credit card balances are creeping up and it’s starting to creep you out, consider these six things.

1. Go On a Diet

Eating less won’t necessarily help you cut your credit card balance (unless you eat at restaurants a lot), but it can make sense to go on a spending diet. Start by cutting out all unnecessary expenditures, while postponing essential purchases for as long as possible. Then, look for ways to save money on all your essential purchases. 

2. Increase Your Monthly Payments

One of the worst mistakes that you can make with your credit cards is to only pay the minimum balance. When you pay just the minimum, it can take years to pay off your credit card debt, even if you don’t make any new charges. In fact, you should be paying as much as you can in order to lower your interest charges and pay down your balance as soon as possible.

3. Make Your Payments Sooner

Just because your statement shows a due date a few weeks in the future, doesn’t mean that you should wait that long to make your payment. Credit card interest is calculated based on your average daily balance, so you will save money by making your payments as soon as you can.

4. Make More than One Payment Each Month

Another way to pay down your credit balances faster is to make multiple payments each month. For example, you could choose to make a payment twice a month after you receive your paycheck, or anytime you receive a significant amount of cash. When you do this, you will reduce your average daily balance with each payment, which will lower your interest charges.

5. Use a Different Method of Payment

By design, credit cards make it easy to spend money you don’t have, which enables some people to get carried away. If this is happening to you, it might be time to store your credit cards in a secure place and temporarily start using cash, checks or debit cards. Some people put their cards in their sock drawer, but others will lock them in their safe or even freeze them in a block of ice.

6. Consider a Balance Transfer

The biggest problem with a high credit card balance is the interest charges that you face. Thankfully, there are credit cards that offer 0% annual percentage rate (APR) promotional financing on balance transfers that last from as little as six months to as long as 21 months. When you open a new credit card account with one of these offers, you can transfer your existing balances to that account and avoid interest charges during its promotional financing period. When the promotional financing expires, the standard interest rate will apply to any unpaid balance. Just be aware that most credit cards with 0% APR promotional financing offers will apply a 3% to 5% balance transfer fee to the new balance.

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