Sometimes it’s not our intention to end up in debt. I had every intention of being someone who was savvy enough to use their credit cards to get flight mileage points, free money, and rewards. It was all planned out. I would use my credit card to pay for my monthly expenses, then I would pay it off – in full, every month. The best part was that I would get triple (that’s right, 3X) the reward points for essential purchases like gasoline for my car, groceries, bills, etc. Another bonus would be zero percent interest (that’s right, 0% interest) for an entire year and a half!
Rewards galore were going to be cash back, gift cards, and travel points. I had a grand scheme for all of this free money. It was a fool-proof plan. It wasn’t of much concern to me, the prospect of my interest rate jumping up to 17%, because that was a year and a half away. I was going to pay my bill in full, every month. One thing I didn’t account for…my penchant for instant gratification.
Things started off well. My plan was working. I was making regular purchases with my new credit card at the grocery store and at the gas station. The points were piling up! I was paying off my balance every month, when I received my paycheck. Each month, I did this. Then I slipped, and bought an outfit. Extra care was taken to pay it in full again, with the extra clothing charge. The month after, I used the card for a mini-vacation. Eventually, my credit card bill began growing past my allotted monthly amounts for groceries and gas. There was a creep happening, and I ignored it.
Flash forward to when my introductory rate (of 0%) ended and I had needless debt, and nothing useful to show for it. Some people can use credit cards responsibly. I found out, the hard way, I am not one of those people.
This is a cautionary tale, of course. My best advice is credit cards are not for me. You may be someone who has incredible self-control, and you can earn those rewards without accumulating any extra debt. The greatest way to pay for non-essentials is to make sure you have the cash to cover it.
If you are in debt, and looking for your best route out, here are some solutions:
- First, stop accumulating “bad debt”! This means anything that you cannot use to your benefit during tax season, or debt that is not earning you any return whatsoever. Take care of eliminating your bad debt first.
- Don’t miss payments – it can wreak havoc on your credit.
- Contact the company your loan is with to see if you can work out a deal to lower your interest.
- Explore options for a balance transfer without any fees for a lower interest rate.
- Look into consolidating – there are some alternative options besides banks, like crowd sourcing through Prosper
- Make a plan for how much you will contribute to paying off your debt each month and automate it to stick with your plan.
- Keep yourself motivated by tracking your progress and remembering what you can do with your money once it’s not going towards debt payment!
- If you are truly struggling and unable to make your minimum monthly payments, seek reputable credit counseling.