Credit Card Debt Management: What You Need to Know?
Credit card debt management relies on three elements: knowing your debt, making a plan, and following through with that plan. Though it sounds simple enough, the truth is that managing credit card debt is often difficult and stressful for reasons beyond our control.
For example, job loss, medical bills, or other unanticipated expenses can make it challenging to stick to a plan. Additionally, many people are simply not good at budgeting and tracking their spending. As a result, they often find themselves in debt despite their best intentions.
If you're struggling with credit card debt, know you're not alone. In fact, according to the Federal Reserve, Americans have hundreds of billions of dollars in revolving debt, much of which is credit card debt.
While it might seem daunting, there are steps you can take to get your debt under control. With a little effort and discipline, you can develop a plan to help you get out of debt and stay out of debt for good.
What is Credit Card Debt?
Credit card debt is what you owe on your credit cards. It's important to remember that credit card debt is not the same as other types of debt, such as a mortgage or car loan.
With credit card debt, you're borrowing money you will need to pay back with interest. The interest rate on your credit cards will vary depending on the card type and your creditworthiness, but it's typically much higher than the interest rates on other types of debt. This means that if you're carrying a balance on your credit cards, you're likely paying hundreds or even thousands of dollars in interest each year.
And, if you're only making minimum payments, your credit card debt will continue to grow and become unmanageable - leading to common debt-stress symptoms such as headaches, insomnia, weight loss/gain, chronic pain, and anxiety.
Why is Credit Card Debt Management Important?
Credit card debt management is essential because it can help you get control of your finances, reduce stress, and improve your credit score. When trying to manage credit card debt, there are three main things to keep in mind.
1. Know Your Debt
The first step in credit card debt management is understanding your debt. This includes knowing how much you owe, what the interest rates are on your cards, and what your minimum payments are.
If you don't know this information, it's time to sit down and look at your statements. There are several ways to calculate credit card debt, but the best estimates your true debt total - not just what's on your statements.
True debt totals are usually higher and represent the entire amount you would need to pay off your debt if you stopped using your cards and only made minimum payments. The true debt total is widely considered a more accurate way of really knowing your debt so that you can take the best steps to manage or pay it off.
2. Make a Plan
The next step in credit card debt management is to make a plan. Debt management plans can vary depending on the person, but there are some key elements that all successful plans have in common.
A good debt management plan will include a budget. This will help you track your spending and make sure that you're not using your credit cards to make unnecessary purchases. It's also important to have a goal in mind when you're creating your budget.
Your goal could be to pay off your credit card debt in a certain number of months or years. Or, you may want to focus on reducing your interest rates or monthly payments. Whatever your goal is, make sure it's realistic and achievable.
If you've been struggling with the mental and emotional effects of crushing or sudden credit card debt, your plan could (and should) also include professional relief options such as Clarity's debt resolution program. Debt management programs that settle credit card debt can be a financial lifeline in your plan and strategy for success.
3. Stick to Your Plan
The final step in credit card debt management is sticking to your plan. This can be difficult, especially if you're used to using your credit cards for everyday purchases. But doing so will end sleepless nights and anxious days, helping you regain control of your overall wellbeing.
If your credit card debt management plan revolves entirely around you pulling up your bootstraps and going at it alone, you may need some sort of motivation or outside support to stay on track. This support could be in the form of a friend or family member working on getting out of debt or changing your lifestyle to include calming activities like yoga or meditation.
Those whose credit card debt management plans include the services of companies like Clarity can ensure success by maintaining regular communication in regard to your monthly withdrawal capabilities, your savings goals, and updates on the status of your debt portfolio.
Either way, the key is to find what works for you and then stick to it. Be creative and communicative throughout the entire process to find the best solution for your unique financial situation.
Not having a plan for growth.
One of the final mistakes small businesses make is not having a plan for growth. Many small businesses get comfortable with their current level of revenue and don’t invest in strategies to grow their business.
As a result, they miss out on opportunities to increase their revenue and expand their reach. In many unfortunate cases, by the time a small business realizes they need to grow, it’s too late, and it's forced to close its doors and file for bankruptcy.
So, if you want your small business to succeed, you need to have a plan for growth. Consider speaking with a financial advisor, niche consultant, or marketing team to discuss ways to grow your business through new initiatives, product development, or franchising opportunities.
Can Low Income Earners Use a Debt Management Plan?
If you're struggling to make ends meet, you may wonder if a debt management plan is right for you. It's important to remember that anyone can benefit from a debt management plan - no matter what their income.
If you're on a low income, there are a few things to keep in mind when creating your debt management plan. First, your budget may be more limited than someone earning a higher income. This means that you'll need to be extra mindful of your spending and make sure that every purchase is absolutely necessary.
Second, you may need to get creative with ways to boost your income. If you can find ways to bring in a bit of extra cash, you can put that towards your debt and pay it off even faster.
Finally, don't forget to calculate a plan based on your true debt and not your monthly statement. This will ensure that you are making meaningful payments and steps toward your credit card debt management plan that will lead to debt freedom and a better quality of life.
When Should I Start Credit Card Debt Management?
The best time to start credit card debt management is as soon as you start using your credit cards. This will help you get a handle on your spending and make sure that you're not racking up more debt than you can afford to pay off.
Of course, many people don't realize they have a problem with credit card debt until they're already in over their heads. If that's the case, don't worry - starting a credit card debt management program anytime can reduce stress, stop harassing calls, improve your financial wellbeing, and help you get out of debt for good.