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March 12, 2024
By: Jennifer Floyd
March 21, 2024 is Credit Card Reduction Day.
In a world where credit cards are ubiquitous and can easily tempt us with their convenience and rewards, it's important to take a moment to evaluate our financial habits.
Whether you’re currently struggling with credit card debt, aiming to avoid it altogether, or in the process of paying existing credit card debt down, this day serves as a reminder to take control of your financial well-being. We will explore effective strategies for reducing credit card debt as well as staying out of debt in the future.
Tips and Tricks for Reducing Existing Credit Card Debt:
- CREATE A BUDGET
Start by evaluating your income and expenses to create a realistic budget. Allocate a portion of your income towards paying off your credit card debt each month. Often, setting up recurring monthly payments can be the easiest strategy for ensuring those funds are always used for their intended purpose and not allocated elsewhere. - PRIORITIZE YOUR PAYMENTS
If you have multiple credit cards, focus on paying off the one with the highest interest rate first while making minimum payments on the others. This strategy, known as the avalanche method, can save you money on interest over time. By focusing on the highest interest rate, you are ensuring that the balance is consistently lowered so the monthly interest being applied decreases steadily. - CONSOLIDATE YOUR DEBT
Consider consolidating your credit card debt with a balance transfer to a card with a lower interest rate or a personal loan. This can help simplify your payments and potentially reduce the amount of interest you pay. - CUT YOUR EXPENSES
Look for areas where you can cut back on expenses to free up more money for debt repayment. This could involve dining out less, canceling subscription services you don’t use, or finding more affordable alternatives for everyday purchases. - NEGOTIATE WITH CREDITORS
Did you know that you can negotiate terms of your credit card’s plan? Don’t hesitate to reach out to your credit card companies to negotiate lower interest rates or work out a payment plan that fits your budget. Many creditors are willing to work with you if you’re proactive about addressing your debt and able and willing to make consistent payments.
Now that we’ve discussed how to lower your credit card debt, how do you ensure that you stay out of credit card debt, especially during periods of high inflation?
How to Stay Out of Credit Card Debt:
- USE CREDIT WISELY
The biggest issue with credit cards is the ability to purchase or pay for items that you can’t afford directly. Only charge what you can afford to pay off in full each month. Avoid using credit cards for impulse purchases or luxuries that you can’t afford with cash. The smartest way to use your credit cards is to make sure that you’re able to pay off the total balance on or before your due date each month. - BUILD AN EMERGENCY FUND
Having an emergency fund can help you avoid relying on credit cards to cover unexpected expenses. Aim to save enough to cover three to six months’ worth of living expenses. These funds can help if you suddenly find yourself in financial crisis or even if an urgent large expense presents itself, such as an emergency home repair.
- MONITOR YOUR SPENDING
Keep track of your credit card transactions regularly to ensure you’re staying within your budget. Most issuers offer mobile apps or online tools to help you track your spending. Logging into your mobile app or online account and checking through your expenditures can help you keep an eye on how much you are spending. This habit will also help prevent fraud as you will be viewing charges regularly and will notice anything out of the ordinary.
- AVOID MINIMUM PAYMENTS
While making the minimum payment on your credit card may seem convenient, it can keep you trapped in a cycle of debt due to accruing interest. Always strive to pay more than the minimum whenever possible. As mentioned in number 1, try and make sure you’re paying off the total balance of the card each month. This will keep you out of the cycle of accruing interest and therefore spending even more money.
- EDUCATE YOURSELF
Take the time to understand how credit cards work, including interest rates, fees, and rewards programs. Being informed can help you make smarter financial decisions and avoid pitfalls that could lead to debt. Reaching out to a financial advisor is always a smart choice as they are trained to help you understand your debt and how to work with it.
- USE DEBIT CARDS MORE FREQUENTLY
In today’s world of excess, we’ve become so accustomed to swiping our credit cards for everything but a great way to ensure you spend within your means is by utilizing your debit card more frequently. With your Newton Federal debit card, you will not accrue interest and can only spend the money you currently have. Additionally, our Newton Federal Rewards Visa debit card acts as a credit card in one big way – we offer rewards and discounts for shopping at some of your favorite local businesses.
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On Credit Card Reduction Day, we hope you will take the opportunity to assess your financial situation and make proactive choices to reduce any existing credit card debt and avoid future risks.
By following the tips and tricks we’ve outlined for you, you can take control of your financial health and work towards a more secure future. Remember, it’s never too late to start improving your financial habits and building a brighter financial future for yourself.
