If you feel like you are drowning in credit card debt, you aren’t alone. According to CreditDonkeyTM, the average amount of credit card debt is $5,331 and 55% of credit card users don’t always pay their bill in full. That means they carry a balance from month to month, incurring interest charges and possibly getting themselves into a spiral of revolving debt. Does this sound like your situation?
Credit cards can be helpful if you lack enough savings to pay for medical expenses, household or auto repairs, or an emergency. However, if you don’t pay your card in full every month when it is due, getting out of the cycle of revolving debt can be difficult. The key to getting back on track is to stop paying the minimum – and start paying much more. Here’s why:
Pay off your balance faster
By paying only the minimum amount required every month it could take years – even decades – to pay it all off. Shave that time drastically by paying as much as you can each month. You’ll get out of debt faster plus, it will pave the way to the next reason…
Save interest – a lot of it
The longer you are in debt, the higher your total of amount of interest will be. Those finance charges can add up to hundreds and possibly thousands of dollars over time. While paying over the minimum each month may put a strain on your budget temporarily, in the long run you will save a lot of money.
Improve your credit score
Paying down your credit cards will help lower your credit utilization ratio, the ratio between how much credit you have available and how much you have used. The credit utilization ratio is one factor that is used to determine your credit score. The lower the ratio, the better. You’ll need a decent credit score if you want to apply for a mortgage or car loan. Even landlords will sometimes look at a prospective renter’s credit score. They want to make sure they will be renting to someone who is responsible with money.
The good news is that you don’t have to be completely debt-free to start improving your credit score. As you gradually pay down your debt—as long as you do not incur any more of it—you’ll begin to reduce your credit utilization ratio.
Read this Omni article to learn more about the importance of your credit score and how you can improve it.
If you can’t pay more…
These are a few of the major reasons why you should pay more than the minimum on your credit cards. Of course, if it is not feasible to do so, be sure you at least pay the minimum amount due on time, every month. And do whatever possible to avoid charging anything else. Make reducing your credit card debt a priority.
Debt consolidating can help
If you are carrying big balances on numerous high-interest credit cards, remember that an Omni Financial® debt consolidation loan is an option. A debt consolidation loan allows you to pay off your credit cards and consolidate that debt into a single fixed-rate personal loan. You’ll have one due date to remember and our team will work with you to determine a repayment schedule that fits your budget. Apply for a debt consolidation loan today or contact our team and find out if it is a smart choice for you.
The information provided in this blog post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.
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