Are you seeking to buy a new home? Is a new car on your wish list? Do you need to take out a personal loan? Well, credit card debt may be standing in your way and limiting your ability to create the life of your dreams.
It’s 2019 and Americans are diving deeper into credit card debt with no visible escape plan. According to Federal Reserve data, outstanding consumer debt is at an all-time high, exceeding $4 trillion as of July 2019.
Research from Clever has found that millennials are greatly impacted by credit card debt. While student loan debt may be the main culprit of millennial financial stress, credit card debt doesn’t rank too far behind in the list of financial frustrations. Forty-one percent of millennials say their credit card debt has prevented them from making a major life purchase.
Millennials are struggling with the homeownership process due to waning credit scores and increased debt obligations. The most important thing millennials can do right now is to take control of their financial situation and eliminate any debt that may be standing in their way.
Here are three tips to take control of credit card debt and move closer to your dreams.
Understand Your Credit Score
Don’t just grab the free credit reports and memorize your credit score. Try to understand why your credit score is what it is and improve it. Traditionally, credit scores are divided into five components: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
Find out your grade for each piece of your credit score and determine the best ways to increase your score in the shortest amount of time. Most FICO scores range from 300 to 850, and the highest scores get access to the best rates for homes and cars.
Don’t Become a Credit Card Junkie
If you can’t control your credit card spending habits, leave the cards at home. Discipline is a key component to achieving your dreams. Don’t spend more money on a credit card than you have available. If you do use your credit card for an emergency, make sure you have a reliable action plan to pay it off before the interest payments get out of control.
Talk to a financial coach as soon as possible to help you create a game plan that will save you tons of money. “Working with a financial coach is the smartest move you can make to avoid wasting time and money on credit card debt,” says Jeff Wilson II, author of The Lies Our Parents Were Sold and Told Us and principal CPA at The W2 Group accounting firm. “Those who wait to take action end up in a cycle of debt that starts to control every aspect of their lives.”
Pay Balances in Full
Don’t fall for the minimum balance trick. Paying a minimum amount sounds very enticing but doing so will extend the length of your credit card payments. You don’t want to be paying the same credit card balance for more than 10 years because of interest accumulation!
Be financially responsible and pay your balances in full. If a monthly payment system is too much for you to handle, start paying your credit card bill weekly to make it more manageable.