The cycle of credit card debt is often endless for many people: you use the card because you don’t have money, then you pay the bill and run out of money again, then you need to go back to using the card.
But there is no need to despair. By following the guidelines below, you’ll know how to negotiate credit card debt, get away from that cycle, and get out of debt.
1. Analyze your accounts and understand the reason for the debt
It is important to understand what led you to this default situation to get out of it.
Therefore, make an analysis of your entire financial situation. Know your main card expenses and understand your financial behavior.
This will make it easier to diagnose when you lost control and spent more than you could afford.
That way, you can start to cut some habits that may influence your total bill and reduce spending on non-essential things.
To better organize this information, use a financial tracking application such as Moneyspire or Koho Financial. Thus, it is possible to better measure your income sources, fixed and variable expenses, and credit card purchases.
2. Cut expenses to get rid of credit card debt
Remember, if your account doesn’t close at the end of the month to the point where you can’t pay your credit card bill, it’s a sign that you’re spending more than you earn.
The solution is to cut unnecessary expenses and reduce, or at least re-evaluate, what you cannot eliminate.
Set a limit on some expenses like grocery shopping and leisure. This will help keep track of finances. Be sure to have fun, but look for cheaper ways that weigh less on your pocket.
3. Set a credit card spending cap to get rid of credit card debt
Keep in mind that, as a general rule, your credit expenses, from all credit cards should not exceed 30% of your income.
Yes, that’s right: the sum of everything should not represent more than this percentage.
Keeping expenses within that limit is critical to ending credit card debt and getting you out of the never-ending cycle that doesn’t even let you save the minimum amount of money for your future.
Do your math and review your expenses to respect this ceiling, however difficult it may be. Remember that the reward in the future will be much better: a clear conscience and free from the financial backlog.
4. Use the card conscientiously: credit is not debit
To have more control over your money, prefer to use the debit function for everyday purchases, as this is the money you have in your chequing account.
Credit should be reserved especially for those more expensive purchases, such as a new refrigerator, an unexpected expense with a pharmacy or the veterinarian, for example.
Reserve this option for what needs to be paid in instalments, always making transactions conscientiously — when you write down the expenses in your financial spreadsheet, enter the instalments for the next few months, so you don’t forget these expenses are to come.
5. Review the credit card you use to get rid of credit card debt
How about getting rid of unnecessary fees? An alternative is to use a card that does not pay the annuity, such as the Tangerine Money-Back Credit Card.
One of the main advantages of Tangerine Money-Back Credit Card is this exemption from annuity and also greater control over your expenses.
Letting credit card debt pile up is a trap for financial instability. This is because the revolving interest rate on the card is very high.
However, by following the few tips above, it is possible to get around this situation and get out of debt.