The average American carries over $5,000 in credit card debt. While this may not sound like an outrageous number, the problem lies in their ability to keep the balances low and make ends meet in the face of financial hardship. Whether you have just exited a Florida bankruptcy case or are looking to boost your money management skills, here are some tips for avoiding irresponsible credit debt:
1. Plan your purchases– Credit should be a financial tool for building credit, not convenient spending. Know exactly how much you can afford in a monthly payment and keep your purchase balance below your maximum monthly payment.
2. Keep the balance to limit ratio low-Many people make the mistake of accumulating a balance more than half of their spending limit. Once you have exceeded a balance greater than 40% of your available limit, your credit can be negatively affected. Don’t max out your credit cards and be mindful of your balance to limit ratio.
3. Pay more than the minimum payment-The minimum monthly payment is a requirement of your lender, not a favorable allowance for you. When you only pay the minimum payment you set yourself for a long road of paying far more by way of unnecessary interest fees. Pay as much as you can afford each month to reduce your balance as quickly as possible.
4. Pay off balances within a few months-Carrying a credit balance for long periods of time can hurt your credit and set you up for failure if you were to experience a loss of income. It is wise to pay off your balance as quickly as possible, preferably less than six months.