As a skilled trades worker, you may be prone to carrying high balances on your credit cards due to irregular income or unexpected expenses. However, carrying credit card debt can result in interest charges, late fees, and damage to your credit score. To avoid falling into the debt trap, here are five simple credit card management strategies that you can implement today.
1. Pay More Than the Minimum Payment
When you receive your monthly credit card statement, you’ll see that there’s a minimum payment due. However, making just the minimum payment each month will keep you in debt longer and cost you more in interest charges. By paying more than the minimum payment, you’ll lower the amount of interest you owe and chip away at your debt faster.
According to Credit Karma, if you have a credit card balance of $5,000 with an interest rate of 15%, paying just the minimum payment each month will take you over 18 years to pay off and cost you almost $8,000 in interest charges. However, if you increase your monthly payment to $300, you can pay off your balance in less than two years and save over $6,700 in interest charges.
So, the bottom line is that paying more than the minimum payment will save you money in the long run and help you get out of debt faster.
2. Set Up Automatic Payments
Late payments can result in late fees and damage to your credit score. To avoid this, set up automatic payments for at least the minimum payment due each month. Most credit card issuers offer this feature, and you can set it up through their website or mobile app.
By setting up automatic payments, you’ll never miss a payment deadline, and you’ll avoid late fees and negative marks on your credit report.
3. Monitor Your Credit Utilization
Your credit utilization is the amount of credit you’re using compared to your total credit limit. If your credit utilization is too high, it can negatively impact your credit score.
To keep your credit utilization in check, aim to use no more than 30% of your available credit. For example, if you have a credit limit of $10,000, try to keep your balance at or below $3,000.
By keeping your credit utilization low, you’ll have a better credit score, which means you’ll qualify for lower interest rates and better credit offers.
4. Don’t Use Your Credit Card for Cash Advances
Using your credit card for cash advances is a quick way to rack up debt and high-interest charges. This is because cash advances come with higher interest rates, typically around 25%, and they accrue interest from the day you take out the cash advance.
Instead of using your credit card for cash advances, consider using other sources of funds, such as a personal loan or a line of credit.
5. Have a Budget and Stick to It
Creating a budget is essential for managing your finances, including your credit card debt. A budget will help you understand where your money is going and identify areas where you can cut back.
To create a budget, start by listing all of your monthly expenses, including rent or mortgage, utilities, groceries, and transportation. Then, subtract your expenses from your monthly income to see how much you have left over. If you have money left over, allocate it towards paying off your credit card debt.
By having a budget and sticking to it, you’ll have a clear understanding of your finances and be able to manage your credit card debt more effectively.
The Bottom Line
Credit card debt can be a burden, but by implementing these five simple strategies, you can avoid falling into the debt trap. Pay more than the minimum payment, set up automatic payments, monitor your credit utilization, don’t use your credit card for cash advances, and have a budget and stick to it. With these tactics, you’ll be able to manage your credit card debt effectively and improve your financial health.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
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