Are you being burned by your credit card habits?
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Credit cards are a great convenience and, if used wisely, can help establish and keep your credit score high. But if you lose control of your credit card spending, max out your cards, and can only afford to pay the minimums, you can quickly wreck your credit rating. You can also end up in legal hot water with aggressive credit card debt collectors. Here are five signs that your credit card habits are in bad shape and need a major course correction.
#1 You have no idea how much you're charging each month
Many people swipe, swipe, swipe and never add up how much they're charging. It's always smart to know how much you're spending whether you're using credit cards, debit, checks or cash. You need a budget and should stick to it, but it can be very easy to rack up more charges than you can afford to pay if you're not keeping track. If you can't afford to buy something for cash, you likely just can't afford it.
#2 You can only afford minimum payments
If your credit card balances are so high that you're only paying minimums, that's a huge problem. Ideally you should never carry a balance over month to month. If you pay off in full what you charge each month, you'll get the benefits without paying any interest so long as you pay on time. Paying minimums means you'll pay big interest charges and it will take you years to pay off the balances.
#3 You are maxed out
You should never use more than 30% of your total available revolving credit line to get the most benefit to your credit rating. So if you have three cards with a total of $10,000, you should never carry over more than $3,000 from month to month. Smart consumers won't carry over any balance, but carrying over more than 30% means your credit score will take a dip, and that's not good.
#4 You've been denied new credit
If you've been told “no way” when you applied for a new credit card, a car loan, home mortgage or other line of credit because your credit card debt is too great, that's a huge red flag. Creditors assess your income and your existing debt load when they make credit decisions, and if it's obvious you're overextended, they will deny you more credit or new credit, as they should.
#5 You are spending on necessities
You should never be in a position where you have to use your credit cards to get by – for food, utilities, or other bills. It's one thing to charge your groceries on a credit card to get flyer miles or cash back rewards, but then you should pay the balance off in full each month. If your credit cards are your financial lifeline, you're in trouble and need help to get out from under the debt on a reasonable budget.
Credit cards used wisely can greatly benefit you. They are perfect to use for rental cars, to purchase items you want covered by the card issuer's protection program or to take advantage of rewards programs such as frequent flyer mile or cash back plans. But when your credit card habits are out of control, the benefits will not outweigh the costs, and you can find yourself in over your head very quickly.
If your credit card debt is unmanageable, you can barely pay the minimums and are being dogged by credit card debt collectors about past due bills or going over your credit limit, we can help. Contact the Law Offices of John T. Orcutt for a free consultation with an experienced North Carolina bankruptcy attorney. Call +1-919-646-2654 for an appointment in Greensboro, Raleigh, Fayetteville, Garner, Wilson or Durham to see how you can ditch your credit card debt for good!