Monday, March 23, 2009

Reducing Your Credit Card Debt

In current time, almost everyone is having a credit card. Having a credit card seems to be a symbol of wealth for most people. Some people think that having a credit card make themselves feel proud and looks wealthy but actually it is not.

I am not saying that we should not have credit card. If possible, try to have only one credit card and control your spending habit using the credit card.

Some questions to ask yourself about credit card: a) Is credit card a necessary or just an extra thing for me? b) Credit card gives me more flexibility because I do not need to bring a lot of cash to buy stuff I want, but am I over spending using my credit card?

Both of the questions above is quite important to make yourself aware of your need and your spending habit. So, do ask yourself these two questions when you get an invitation from the bank to sign up for a new credit card (Normally, saying free for life. No yearly fees.) and ask yourself when you start to spend like crazy using your credit card.

Is Credit Card a Necessary for You?

Credit card is surely a very clever invention. It is very convenient for the cardholders because they do not need to bring cash to purchase the stuff they want. Cardholders must beware of some bad things about credit cards.

Bad Things:

a) Monthly charges if you do not pay on time. b) Charges when you purchase certain items. c) Spending over your own limit. d) Buying stuff that are not needed.

You need to pay special attention to your spending habit after owning a credit card. This is because people tend to over spend when they have a credit card with them. Next, you need to be aware of the fees and charges when you purchase certain items. Even a low 1% charges will be a very expensive charges.

Why 1% Charges is Expensive?

Imagine that you only receive around 3% to 5% of interest for your saving in bank but credit card is charging 1% of fee for purchase of certain products. Is that expensive charges? Anyway, this is just an example, I just want to remind you about fees and charges.

Some credit cards companies offer free for life credit card but with terms and conditions. For example, a company offers you a credit card which is free for life but the terms and conditions mention that you need to use the card at least 12 times per year. This will make you spend more money and spend more in fees.

Some ways to reduce your credit cards debt:

1. Cancel all your unused credit cards. By canceling unused credit cards, can help you avoid yearly fees.

2. Pay off the credit card. You need to start by paying off credit cards that have the highest debt charging highest fees. Then, cancel the credit card. This way, you can avoid using credit card that charges high fees.

3. Reduce the number of credit cards to only one or two cards. Some people are having more than 5 credit cards. This is a bad habit because you will surely spend more, pay more in fees and get deeper in debt. So, reduce to only one or two credit cards for your own convenience not for "look wealthy".

So next time when you spend with credit cards, please remind yourself to spend within your limit. Do not over spend. Take control of your personal finance and reduce your financial problems.

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