Using a credit card to pay for purchases and bills can lead to significant debt if you aren't careful. Interest charges, coupled with late payment fees, can cause the amount you owe to keep multiplying, making it difficult to pay credit card bills. The first step in reducing your credit card debt is to stop using your credit card. By planning ahead and making smart choices with your money, you can avoid credit card usage and stay within your budget.
Step 1
Make it difficult to use your credit cards. Put the cards in a safe deposit box or freeze them. If you want to make a purchase, it will be much harder to use your credit card account if the card is safely locked away in the bank or in a block of ice in your freezer. While you wait for your credit card to thaw, you will have plenty of time to decide if your intended purchase is really a necessity.
Step 2
Use a debit card to pay for local and online purchases and bills. Debit cards are linked to your savings or checking account at your bank, and the money is deducted from your account for each purchase you make. Using a debit card means that you will need to plan your purchases carefully and make sure that there is enough money in your account to cover the charge.
Step 3
Prepare a budget that fully details your monthly expenses and income. Knowing exactly how much money you must pay each month and how much money you make will give you a clearer picture of your financial situation and help you avoid using your credit card to buy items you can't afford. Include a category for entertainment; otherwise, you may feel too restricted by your budget and be tempted to break out your credit card to buy yourself a special treat.
Step 4
Plan and save for major expenditures. If you need a new stove or roof, find out how much you can expect to pay for these items and begin saving. Paying in case for major repairs or appliances will save you money on interest charges.
Step 5
Throw away credit card offers as soon as you receive them in the mail. Credit card offers can be very enticing, particularly if the company is offering an incentive for opening a new account.
Tips and Warnings
- Open a savings account if you don't already have one. Determine your expected extra expenditures for the coming year, including items such as vacations, appliance replacement, taxes, medical bills and tuition. Add up all of the expenditures and divide the total number by 12. If you place that amount in your savings account each month, you will accrue enough money to pay these bills without using your credit card.
- It may seem like a good idea to close all of your credit cards to avoid temptation, but doing this may actually lower your credit score. Bankrate.com recommends that credit card holders not close any accounts if they plan to finance a car or house soon. If you feel that you must close accounts, leave your oldest account open, as it provides a record of your credit worthiness.
Things You'll Need
- Safe deposit box
- Debit card
- Budget
- Savings account
Member Comments