Too many credit cards can also damage your credit report. I’ve also found that some of my credit cards now require an annual fee. They didn’t have one during the first year. But, now they do. If you forget to pay the annual fee because you don’t use that card, you could run the risk of damaging your credit score when the credit bureaus report missed payments.
6. You Must Know Your Credit Cards’ Interest Rates
If you want to pay off your credit card and other debt, you have to know how much you are paying in interest. You need to know your annual interest rate or APR that you pay each month on your credit cards.
Many financial experts recommend that you start paying off your credit card debt with the cards that have the highest interest rate. Of course, you have to know your interest rates to do this.
You should list all of your credit cards, which can be a part of your family’s net worth calculations. As soon as you lay out all of your debt and the similar interest rates, you will know which ones to tackle first.
Many debt reduction plans require you to pay the minimum monthly payments on all of your debt. But, then you pay as much as you can with the disposable income from your budget on the credit card with the highest interest rate.
As soon as you pay off that card, you take that same payment and apply it to the minimum payment that you were already making on your credit card with the second highest interest rate. This method allows you to flow additional payments into the each subsequent card, building up a significant amount each month as you continue to pay off your credit cards one by one.
This method is slightly different than the debt snowball repayment plan, which targets your credit cards with the lowest balance first. While the initial balances and order are different for these two methods, the thought process behind paying off your debt is the same. You continue to build up the amount you pay on each subsequent card with the new freed up cash flow from the previous debt repayments that you’ve completed.
7. Budget for your credit card payments
A responsible credit card owner knows how much they have in credit card debt and when the minimum monthly payments are due. You credit card payments should be a line item in your family’s monthly written budget.
Having a placeholder in your monthly budget for your debt will help you to pay off your credit cards. Putting your credit card payments in your budget is a healthy way to have debt.
Credit card users can have healthy financial habits with debt and correctly using credit cards. Using credit cards the right way can help you build your credit history and then qualify for loans that you need to make larger purchases for items such as a home mortgage. Creating healthy habits with your credit cards will help you move on to more substantial financial goals.