Smart Tips for Managing Your Credit

These days, many of us are finding it difficult not to fall behind on our credit card bills. It’s time to take control and properly manage your debt to reduce both high balance and interest charges. We’re all aware that a low credit score can negatively impact your finances, even more so when considering large purchases such as a home or car. Paying higher rates to borrow money can add up to hundreds of thousands of dollars when compounded over the length of a typical mortgage loan.

Organize all your debts: Prepare a list of your credit card accounts along with the account number, interest rate, outstanding balance, payment due date, credit limit and the minimum payment. This will give you a clear idea about how much you owe on your accounts and help you manage your bills responsibly.

Don’t just pay the minimum: Try paying more than the minimum payment each month. The minimum payment includes mostly the interest on your account. So, if you pay only the minimum amount, the credit card company makes more interest while you lose the cash in your pocket. Moreover, it’ll take you longer to get out of debt. But paying more than the minimum reduces your balance and helps you pay off credit cards fast.

Aggressively negotiate: If you’re in financial problems or your bills are getting out of control, call the credit card company and tell them about your situation. If required, negotiate a low interest rate at which you’ll find it easier to make your credit card payments.

Alternatively, you can request a different payment plan that’s more affordable for you. As your situation improves, you can inform your creditors and have your payments raised so as to pay off your bills faster.

Plan a budget: Prepare a budget including a list of your monthly income, expenses and bill payments. The budget will help you track exactly where your money goes. You can even cut down unnecessary expenses. Use the budget worksheet in order to maintain a record of your income and expenses.

Stop spending: Do not apply for new credit cards or loans till you pay your way out of debt and bring your finances back in order. It’s difficult to pay down credit card debts when you keep accumulating new balance every month. Avoid using your cards when you’re making a purchase. Instead, use plain cash check or debit cards to pay for a purchase.

Punctual payments: Try to make payments within the due date. You may use check or set-up automatic payment plans to avoid making a late payment. Thus, you can eliminate chances of a late fee being charged on your accounts.

Save for a rainy day: Try to save a certain part of your monthly income in an emergency fund. It will relieve you from the stress of dealing with emergencies. Make arrangements for automatic deposit into your emergency fund. Start off by saving $1,000 and build up an emergency fund worth 3-6 months of expenses to help you plan for emergencies such as job loss, sickness, home improvements or car repairs.

Consolidate your debts: You may transfer the balances on high interest cards to a card having a low rate and thus consolidate multiple credit cards into a single payment. In case you don’t have a low interest card, you may look out for one. If possible, you may even get a card at 0% introductory rat. However, you need to check the duration for which the introductory rate would remain at 0%. If it’s quite long, then you’ll have enough time to pay off your credit card bills at 0% rate of interest. That’ll save you a good amount of dollars.

Now, when you request a balance transfer, ask your creditor if they charge a fee for the transfer. Request him to waive the fee as a one-time courtesy.