5 Signs You May be in Trouble with Credit Card Debt
When used sparingly, credit cards can be an effective financial tool. Careful use of credit cards can help build and maintain a solid credit history. And credit cards can be useful when unexpected expenses come up. Unfortunately, it’s all too easy to accumulate credit card debt to the point it becomes unmanageable. Here are five signs you may be in over your head with credit card debt:
Making Only Minimum Payments
Many people assume that if they’re able to pay the minimum payment on multiple credit cards every month, they’re successfully managing their debt. This simply isn’t true. In most cases the minimum monthly payment barely covers the interest that accrues month-to-month. Paying just the minimum means even modest balances could take years to pay off.
Having One or More Cards at Their Limit
Keeping one or more cards at or near their credit limit is a sign you need to cut back on using credit cards. Having cards at their limit can also negatively impact your credit score by showing a high credit utilization ratio. That’s the amount of outstanding balances on all cards divided by the sum of each card’s limit.
Using Credit Cards to Pay for Everyday Expenses
If you’re using credit cards to pay for things like coffee, gas and groceries and not paying off the balance every month, stop! Think of it like this; do you really want to be paying for this week’s groceries six months (or more) from now?
Not Contributing to Savings
If there’s nothing left to put into savings after you’ve paid all your credit card bills, that’s an indication that your debt is becoming overwhelming. Remember that advice to ‘pay yourself first’? It still applies. Even putting away a small amount every payday can help build a cushion of emergency savings that will eventually eliminate the need for credit cards.
Falling Behind on Payments
Probably the most obvious sign that credit card debt has become overwhelming is paying credit card bills late or skipping payments. Even one missed payment can start building up late fees and may negatively impact your credit score. If you’re falling behind on credit card payments it’s important to ask for help and create a plan to start paying off your debt.
If you’re experiencing one or more of the situations above, free help is available. Credit Counseling is the first step toward taking control of your debt and making a plan to pay it off.