The average household now carries an average of between $6,000 and $10,000 in consumer credit card debt. But there an unfortunate number of people who have more than $100,000 in debt from using multiple credit cards. Consumers rely on credit cards more than ever before and may pay interest rates of more than twenty percent. Added to annual renewal fees, membership fees, and other expenses, the cost of using a credit card, not to mention making minimum monthly payments on the balance, can take a sizable bite from most people’s budgets.
If you are having trouble using credit responsibly and would like to stop using credit cards as much as you currently do, or perhaps for good, start by following a few basic steps to stop being so dependent on plastic money.
1. Cut up all credit cards but one. If you can’t use it, you can’t run up more debt. Some consumers keep a single card for emergency purchases only, and they store the card in the bag of ice that stays in the freezer so that the card must first be defrosted, thus heading off impulse shopping. If your budget will let you use cash only, cut up the last card, too, and don’t open any new accounts.
2. Make out a monthly household budget and follow it. Include mortgage and utility costs, medical deductibles or insurance premiums, food and gasoline, car payments and credit card accounts, clothes, pets, haircuts, auxiliary expenses like the newspaper subscription, entertainment, and anything else that your family uses on a regular basis. Don’t forget about car insurance and car maintenance, even if you don’t pay these each month but use a six-month or annual payment plan, instead. It’s also a good idea to open a savings account for emergencies, even if you can afford to deposit just $25 or so each month.
3. Use an envelope system. A popular plan that many people use is to put cash in monthly envelopes marked for specific purposes, although some bill payments may automatically be deducted from the paycheck first. For example, put $300 in an envelope for groceries, $50 for medical deductibles, and perhaps $100 for clothes. Whatever you don’t use in a given month can be added to the next month’s amount and used for larger purchases.
4. Don’t even open credit offers that come in the mail or email. Discard or delete them immediately so you won’t be tempted.
5. Carry just enough cash to cover planned purchases. Bringing more may tempt you to spend for things that aren’t in the budget. But if you carry too little, you may end up getting tempted to open a charge account at one of the stores where you shop.
6. Get an accountability partner. Ask someone you trust, like a spouse or close friend, to hold you accountable for credit management. Perhaps you can become that person’s confidante for an area of special need in his or her life. Make a weekly or monthly report to let your adviser know how you’re doing. Just knowing that someone is watching may help you stay on track.
Pay off small balances first, and then add those payment amounts to larger credit card payments to eliminate those, too. Before long, you will be debt free and enjoying your newfound sense of self-control and economic freedom.
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