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When it comes to credit cards, consumers are typically at a disadvantage. Interest rates—especially high ones—are designed to keep your debt outstanding and keep you making payments for what seems like forever. If you are unable to pay your card off every month, and are making the minimum payment due, your interest is stacking up and costing you a fortune. And if you forget a payment, your credit card company can hike your rate, creating an even greater burden.
High-interest debt coupled with paying the minimum amount creates a perfect storm for the average credit card holder…and a lot of profit for credit card companies. Overspending and not having a household budget can swallow consumers in a never-ending cycle. Knowing how credit cards and interest work is an important step to becoming debt free. Here are a few resources to help explain further:
Getting out of debt is great; but staying out of debt is even better. If you choose to consolidate and pay off your debt, it’s important to avoid falling back into old habits. Making a personal debt plan is essential to your future financial health. One of the most important ways to avoid debt is to save. That way, if something unexpected happens, you won’t be forced to use a credit card. Even if it’s just a few dollars every paycheck, it will add up quickly.
Keeping close track of your spending is also really important. Impulse purchases usually lead to buyer’s remorse and overspending. Before you make any large purchase, really do your research and consider why you need it. Write down your financial goals and keep them in your wallet or purse. That can also help keep you motivated and on target. For more ways to create and stick to a financial plan, see the following:
Debt consolidation can be a good solution for many who are overloaded with high-interest debt. When considering consolidation, it’s important to evaluate your financial status and see how you’ve arrived at your current situation. Sit down with your bills and monthly expenses. It’s important to look at your debt-to-income ratio and see if your debt load is too much for your income.
After examining your spending habits, it will become clear if consolidation is a good solution to help eliminate debt. You can also determine how much you will need to borrow to pay off your current debt and how long it will take to pay off the loan. To help you in this process, here are some tips and tools to get started: