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Why you need to pay more than the minimum on your debts

    

family-finances.jpgCurrent statistics provided by the U.S. Census Bureau and the Federal Reserve state that the 
average American household carries credit card debt of over $16,000. Credit card debt is fairly common, and it affects hundreds of thousands of Americans who use a credit card daily for groceries, gas, vacations, household items, dining out and medical bills. 

The convenience and abundance of credit cards has created a society dependent upon credit, and the unfortunate side effect is that many people may be paying them off for life. However, you can avoid the pitfalls of these plastic wallet drainers by learning how to better manage your debt and paying off more than the minimum each month. 

Managing your debt

Do you have more than one credit card for which you are currently paying off debt? When combined with utility bills, a mortgage or rent payments, car payments and other bills, those debt payments can be easily overlooked. However, forgetting to pay can cause your credit score to drop. Having too many credit cards with high balances can also lower your credit score. A lower credit score leads to higher interest rates, which will only make it harder for you to pay off your debts. 

To better manage your debt, you can try the following: 

  • Ask credit card issuers for a lower interest rate — Sometimes a simple phone call can yield good results. If you have a good credit score and have made your payments on time, your credit card issuer(s) may lower your interest rate.
  • Consolidate balances — Opt for a card that offers you a balance transfer option.
  • Pay more than the minimum — Always pay more than the minimum, which ensures that more of your money goes to paying off the debt rather than just the interest. This approach will help you knock down the balances faster.

 

A steadily improving credit score is often the result when you employ better tactics. This higher score will give you a better chance of lowering your interest rate, which will also benefit you and make it easier to make payments. Most importantly, paying more than the minimum means you will erase your debt faster, leaving you with more disposable income to put into savings or toward other expenses.

Sources:

https://www.valuepenguin.com/average-credit-card-debt

http://credit.about.com/od/usingcreditcards/tp/pay-more-than-minimum.htm

http://www.brighthub.com/money/personal-finance/articles/18879.aspx

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