Debt is easy to get into and can be very hard to get out of — especially credit card debt. Some debt comes from a single event and the related expenses. Sometimes debt builds over time.
Debt that builds up over time might surprise you. You charge a trip, some dinners out, some clothes — all things that don’t seem like a big deal. But little things can add up.
While credit cards allow the financing of a long term purchase, it’s best to charge no more than you can pay off each month. Once you realize that you have more on your card than you can pay off each month, cut back on spending and start paying it off. If you have multiple credit cards, make the minimum required payment on cards with low interest rates, then pay the rest of what you can afford to pay each month on the credit card with the highest rate.
While there is some emotional relief in paying off a small balance and having fewer cards, paying on the highest rate card most aggressively will get your debt paid off more quickly. If you’re charging a big item, like a trip, have a plan to pay that charge off over a few months. While it’s not common, some credit card companies will negotiate for a lesser amount or forgive interest on a card.
While this lowers your obligation, it reflects negatively on your credit report. An extreme option is to claim bankruptcy. The impact on your credit reports for a bankruptcy is severe and long term, being reflected on your report much longer than late payments.
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