The biggest mistake that a credit cardholder can do is overspend. But despite the fact that it is a common knowledge, many consumers still fall into the credit card debt trap each year.
Did you know that just by paying down your credit cards so that you are using less than 30% of your balance you will see a credit score increase?
It’s an old trick we use when we are doing business financing that requires a good credit score. We have the client either pay down their credit cards to acceptable limits. OR if they can’t come up with that much money we have them call their credit card companies and ask for a credit limit INCREASE that will make it so that they are only using 30%.
Below are more practical tips on how to BREAK bad spending habits that are the leading cause of your lower credit score!
Create a monthly budget plan.
Make a list of your monthly expenses, from your smallest bill up to your largest expense. Subtract the total amount from your monthly income. Based on the figures, it would be easier to gauge your personal spending.
Are you spending more than what your budget permits? Once you know the real answer to this question, you can begin to create a new budget plan that you can follow.
Have you heard of the diet movement, “Mindful eating”? It’s basically a movement that says you don’t need to follow any fancy diet. Just be more aware of your body and nutrition. No random eating. (Click here to read more about Mindful Eating )
Apply the same principals to your spending.
- Do you need this item or just want it?
- Did you include it in your budget for the month?
- Is this an impulse buy or did you do your research to find not just the right item, but the best price?
Fighting bad credit starts from within. As a credit cardholder, you need to be the one in control. not your impulses.
Personal motivation is essential. For example, you can really get out of a lot of debt AND increase your credit score, but focusing on managing your credit card debt.
Set up a specific goal in mind, and give yourself a time limit.
For example, I want to pay down $3000 in debt in the next 6 months.
With a specific goal in mind, you are working towards that goal. It’s not something arbitrary like I want to pay down my debt in 6 months. Never buy on impulse.
If you own a credit card, you have the option to buy things now and pay for them later. Do not abuse this privilege. Before shopping with your credit card, create a list of the things you NEED to purchase and stick to your notes. Fight the urge to charge extra items to your credit card, especially when you did not plan to buy them in the first place.
Regularly check your statements.
With it becoming easier and easier for scam artist to get a hold of your credit card you need to start looking over your monthly statements for any charges you don’t recognize.
These days its smart thieves aren’t putting huge amounts on your credit card or porn. They are going to grocery stores, buying gas and making purchases YOU may have made.
The credit card companies are good at stopping purchases that are obviously fraud.
I had someone using my credit card in Atlanta GA while I live in Texas! They called immediately and asked me if I was in GA buying groceries. I said no and they closed the account and I had a new credit card 2 days later.
But that scammer was shopping at a grocery store I frequent. I may have missed it if they hadn’t caught it!
Get in the habit of going over your statement as soon as it arrives and be ready to dispute any charges you don’t recognize. Doing this sooner, rather than later keeps your purchases fresh in your mind!
Tip: Also check your available credit limit when you go over your statement. A few years ago a lot of credit card companies CUT peoples credit limits. I had a client who got the letter, but since it wasn’t a regular statement he hadn’t opened it ( he thought it was a balance transfer offer) He was SHOCKED when he got a notice that he had gone over his credit limit when he KNEW he was at least $2000 away from maxing out that card.
Avoid taking out cash advances on your credit card
Yes, they are extremely convenient, but they are also OUTRAGEOUSLY expensive! You are not paying the same interest rate when you take out a cash advance as you do when you simply charge something. There is also no grace period, so you starting accruing interest the moment you use it.
Being a habitual late payer
Paying late not only hurts your credit score, but you get charged a late fee that is a minimum of $35! Many credit card companies will INCREASE your interest rate also if you pay late!
Pay your bills off monthly
Want to keep your credit score high AND you want to get out of debt. Get in the habit of paying off your credit cards in full.
But this rule is usually easier said than done. To avoid carrying a balance. Charge only what you can afford to pay in full by the payment due date. Carrying a balance is a slippery slope. I know a lot of people use their credit cards for the “rewards” but if you are paying a lot of interest you aren’t fully getting the benefit of that reward card.