Don’t fall victim to these traps.
- Paying off credit cards could help improve your credit score and limit the amount of interest you accrue.
- It’s important to approach paying off your debt strategically to make the process go more smoothly.
Credit card debt is bad news. For one thing, owing too much money on your credit cards could push your credit utilization ratio into unfavorable territory, hurting your credit score. You could also create a scenario where you rack up a ton of interest charges. That’s pretty much the same as throwing your money away.
If you owe money on your credit cards, you may be anxious to eliminate that debt as quickly as possible. But make sure to avoid these common pitfalls along the way.
1. Juggling multiple credit card balances at once
You might owe $500 on one credit card, $1,500 on a second credit card, and $2,000 on a third. If each of those credit cards has its own payment due date and interest rate, that can be a lot of information to keep track of. Therefore, a better bet may be to consolidate your debt through a balance transfer. That way, you’ll only have to make one monthly payment, which reduces the chance of accidentally skipping a payment.
2. Losing the opportunity to earn 0% interest for a period of time
Many balance transfer offers come with a 0% introductory APR period. If you have good credit, it’s worth seeing if you qualify for one of these cards. While you’ll only enjoy 0% interest on your debt for a limited period of time (usually 12-18 months), getting that reprieve could help you get out of your hole much faster.
That said, if you transfer your balances to a new card with a 0% introductory rate, you’ll need to pay attention to when that period ends. And you should also avoid charging new expenses to that card as you work to pay off your debt.
3. Not understanding how you got into debt in the first place
There are different reasons why people end up with credit card debt. For some, it all comes down to not carefully tracking their spending. For others, it’s about receiving unplanned bills. Think about the events and/or habits that led you into debt and take steps to address them while you’re in the process of paying off your credit cards.
If losing control of your spending is what caused your debt, you can remedy it by setting up a budget that shows you exactly how much you can afford to spend in different spending categories. If you normally spend money carefully but got stuck with credit card debt because your car suddenly malfunctioned or you needed an emergency home repair, try building up your emergency savings. That way, you’ll have cash reserves to draw on the next time an unplanned bill comes up, and you’ll be less likely to have to resort to a credit card.
Paying off credit card debt is an important step in improving your overall financial picture. Just do your best to avoid these credit card pitfalls while working to become debt free.
The best credit card eliminates interest until the end of 2023
If you have credit card debt, transfer it to this top balance transfer card locks you in with a 0% introductory APR through the end of 2023! In addition, you will not pay an annual fee. Those are just some of the reasons why our experts rate this card as one of the best options to help you control your debt. Read the full review of The Ascent free and apply in just 2 minutes.