People tied to credit card debt might be less worried about it than you may think. Inside a survey, a third of respondents said they have credit card debt, yet only 2% said?paying it off is a major worry.
Those?findings originate from?the National?Foundation for Credit Counseling’s 2015 Financial Literacy Survey, sponsored by NerdWallet, and therefore are based on more than 2,000 responses. The suggestion: People in credit card debt might not view it as a threat for their financial well-being.
Credit card debt negatively affects your financial life
Credit cards produce an easy chance to get into debt. As you swipe to cover your day-to-day purchases instead of using cash, your balance can also add up quickly. Having credit debt can hurt you in some ways:
You’re paying interest:?Say your debt $5,000 on a charge card at 18% interest having a minimum payment of $100 a month. If you only pay the minimum payment every month, it will take you seven years, 10?months to repay balance, and you’ll pay $4,311 in interest. That means you’ll end up paying almost twice that which you originally borrowed?due to the interest.
? MORE: How to pay off debt
You might have high credit utilization:?The amount you owe determines 30% of the FICO credit rating, and your?credit utilization ratio?is a huge element in that. Your credit utilization ratio is calculated by dividing your charge card balance through the card’s borrowing limit. For instance, for those who have a $5,000 balance as well as your borrowing limit is $10,000, your credit utilization ratio is 50%. It’s generally recommended to maintain your credit utilization ratio below 30%, so using a large balance in accordance with your limit during a period of time can damage your credit and make it hard to borrow affordably later on.
Your finances are less flexible:?Having a monthly credit card payment keeps you from spending that cash how you want. The more debt you’ve, the less room you’ve in your budget.
Tips for paying off charge card debt
The key to getting and staying not in debt?is to establish good financial behaviors:
Avoid adding more debt.?If you’re trying to lose weight, gaining several extra pounds is really a step in the wrong direction. The same goes for your credit card debt. The first step for shedding debt?would be to avoid contributing to it. You can do this by brushing up on your budgeting skills to prevent spending a lot more than you have. If you need to, cut yourself removed from credit by physically cutting up your card and switching to some debit card or cash.
Increase your earnings.?If getting a raise at work isn’t a choice, you might want to consider finding ways to earn extra cash quietly, which could then be employed to pay down your debt. This might include obtaining a part-time job, selling unnecessary items or offering your skills to others via freelancing.
Do an account balance transfer:?Consolidating your credit card debt having a 0% balance transfer card?can save you both money and time as you take advantage of an introductory 0% APR period to repay your debt. However, some cards charge an upfront fee on the transferred balance, so the mathematics before applying to ensure you’re not taking a loss.
The best strategy would be to avoid credit debt to begin with. But if you are indebted, there are?a number of ways to earn more or spend less to pay for it off. Generally, the Nerds recommend avoiding credit card debt because it can not only harm your credit, but additionally keeps you against expending money the way you want.