Credit card debt is one of the most common forms of consumer financial debt, but there are ways to stop living on your revolving credit. (iStock)
Too many Americans trust credit cards not only as a financial tool, but also as a way of life: Too often, in return, they live off credit cards and accumulate onerous debt.
That’s a problem, since credit card debt is easily the most widespread form of consumer financial debt, as 60 percent of Americans use a credit card with an average card debt of $ 6,194, according to Experian. Overall, US financial consumers had $ 829 billion in credit cards in 2019. That represents a $ 129 billion increase from 2009, Experian reported.
“People often use credit cards as an extension of their paycheck,” said Jeff Rose, founder of Good Financial Cents, an online wealth management platform. “Unfortunately, that is an easy way to accumulate debt.”
Cut the card cable
What is the best way to disconnect from the lifestyle of a credit card? There is no magic bullet, Rose said. It takes a lot of work and discipline, but there is a way forward for card-dependent Americans.
The first step is to establish short-term financial relief, and that’s where a zero-interest credit card or low-interest personal loan can help. Use free online tools to find out what type of credit cards fit your financial situation /
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“Try to move your credit card debt to zero or low interest debt options,” Rose said. “That will help save money on interest charges while paying off credit card debt. As an added bonus, depending on the card you’re transferring to, you may even get some free travel points or other forms of credit card rewards. “
Cardholders looking for other forms of debt consolidation can take advantage of a personal loan if the interest rate is lower than the interest rate on other debts.
“Consolidating all of your credit card debt into a personal loan can eliminate card debt more quickly, especially if the user has only been making minimal payments,” Rose said. “When a card consumer can only pay the minimums, the debt can remain for years. But a consolidated loan at a lower interest rate can direct payments to pay off the principal balance on the actual credit card, and not just the interest on the card. “
Card users can search multiple personal loan options on financial comparison sites like Credible, which offer direct access to low interest rate loan options.
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Take long-term steps to curb the lifestyle of a credit card
Once the cardholder has stopped financial bleeding, it’s time to take some long-term steps to reduce credit card debt forever, financial experts say. Try these tips to curb dependence on credit cards as a financial lifestyle.
Apply the brake
The best way to stop over-reliance is to go at once.
“That requires having a good family budget, that is, knowing how much money you have to spend per month, planning that spending, and sticking to the plan,” said Beverly Miller, founder of the personal finance website, Money Coach Bev. “The first month is the most difficult because you have to pay your credit card bill and pay cash or use a debit card for current purchases instead of using your credit card. But after that first month, using a budget, it gets a lot easier, especially if you don’t have a credit card balance. “
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Live below your means while paying off card debt
Carrying a balance of any kind on a credit card is a sign of out-of-control spending, usually due to not paying attention and not having a budget. “When you live below your means, with a plan and purpose to reach your long-term goals, your priorities will change,” said Miller. “Soon, those purchases you crave and pay for with a credit card suddenly seem much less important.”
Make using without a credit card your lifestyle
“The best way to limit card use is to take all of your credit cards, seal them in an envelope, and write ‘Financial Freedom!’ in that envelope, and then hide that envelope somewhere in your home, “said Mike Earl, a certified financial planner for The Wealth Group in Eden Prairie, Minnesota.” The main reason people have a hard time getting out of credit card debt is because they continue to make new purchases on credit cards. So it’s one step forward and two steps back. “
Earl advises to try not to use credit cards for a month and build momentum from there.
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“When I did this for the first time in my own life about 10 years ago, it was a tremendous feeling not having access to credit,” he said. “All I had was my debit card and some cash in my wallet, and it led to much greater freedom.”
Also, I quickly paid off my credit cards and started saving a lot more money each month, and I definitely came out of the credit card dependency lifestyle.
