Contrary to what some people believe, having credit cards and personal loans are NOT a bad thing. It’s really how you manage it that can either set one up for success or for failure. Majority of us have probably misused our credit cards and are now in the somewhat grueling process of bringing our overall usage down to a more manageable level, or at least 30% of our overall credit card debt. Getting your debt to that point not only allows your overall credit score to get higher, but it also forces you to make much more smarter decisions about how you spend your money. Below are a few ways I keep an eye out on my credit cards and payments:
My overall rule of thumb with any type of CC or Personal Loan: DO NOT TAKE OUT MORE THAN YOU REALISTICALLY NEED
Now, what you “need” varies from person to person. For me, I am a single woman with no children. Therefore, I do not need a credit card/loan that has a huge limit. I’m just not there right now. All the ones I have taken out (I have 3 CC and 1 PL) have been $3k or less, with the CC’s all being $1.5K or less.
If you are currently paying off your debt, do NOT pay all of it off at once. Even if you have all the funds to do so. What I’ve realized is that paying a huge chunk of it off only helps your credit score minutely. Whereas, making at least the minimum monthly payments on time actually reflect more positively on your score because it shows that you are responsible enough to pay your debt back every month.
With that said, do not miss your payments. I have been guilty of this many a times. Mainly because I just didn’t have the money to pay it off or I needed the money to pay for another bill. But in the end, it only comes to bite you in the butt. Making your credit card payments on time means that you avoid unnecessary late fees. With personal loans, set up payments on dates that you know you will have a nice chunk of money available. For most people, this is the 1st. My initial payments for a $3000 personal loan I took out 3 years ago was on the 16th. But every time the 16th came around, I found myself forgetting that the payment went through. I called my CU and had them change the date to the 1st. I found that much easier to remember (Sidenote: As of today, I have officially paid off that entire loan. It feels great to know that I was able to pay that all back and stay diligent).
As I mentioned above, I have 3 credit cards in my use: my bank CC, a store CC, and another banking entity CC. When I first got these cards (not all at the same time btw), I pretty much just used them however I felt was necessary. I didn’t delegate what cards would be used for what because I didn’t think it was necessary. 3 years later, I’m realizing it is very very necessary to do so.
My bank CC is my designated personal credit card. It’s only use is for personal items/emergencies. That’s it. My store CC primary use is for purchasing equipment that I need for blogging purposes. My other credit card is for other expenses related to blogging (paying for my domain, parking when I do a shoot, etc.). Separating what each card is used for helps me to stay accountable on what exactly I am spending my money on.
Yep, I get it! If you decide to be reckless, it comes back to haunt you. Or maybe, life just happened and you needed all the extra money you could (legally) get your hands on. It happens. But it’s not the end of the world. The best way to approach this scenario is by focusing your energy on the ones with higher interest rates. These are the ones that, if you let them go by, your debt will creep up and before you know it, you are owing way more than before.
Every month, set out a certain amount of money solely for credit card bills, and split accordingly. You should delegate the majority of spend towards the credit cards with the higher interest rates. If you can seriously help it, do not use your cards once you begin to pay off the balance (not until you’re able to get it to at least 70% of the credit line). It’s strict. It’s hard. But it’s worth it. And once you have paid off a nice amount, you’ll feel pretty accomplished!
I know this was a bit lengthy, but I hope that this is helpful to some of you! Credit Card and Loan debt can get overwhelming just thinking about paying them off. But with diligence and patience, you can get back to a point where you can manage your finances and they aren’t managing you.
Until next time…
All Photography by Kristen Ashley