Credit Card Debt Management

There’s an art to managing your credit cards. Unfortunately, many people learn through trial and error, which can be extremely expensive and painful. The following are some of the most common mistakes, to perhaps help you avoid the trap of massive debt and skyrocketing interest rates before it’s too late.

1. Paying the minimum - If at all possible, pay more than the minimum. The minimum payments are barely covering interest charges, if at all. Check out Lifehack.org’s 8 Expenses to Cut and How for advice on how to generate more cashflow to throw at credit card debt.

2. Cash advances - This use of a credit card carries the absolute highest interest rate. This is on top of the initial percentage fee charged for the convenience of the cash advance (typically 2 to 4% of the advanced amount). Worst of all, the interest starts accruing immediately, with no grace period.

3. Negotiate your medical bills - Charging your medical costs is an extreme solution for a non-emergency situation. It is better to negotiate payment plans with your medical providers, something they are usually very willing to do.

4. Overestimating credit card rewards - Rewards are great and all, but practically worthless when combined with interest charges. So before you go charging everything in sight in the name of good rewards, make sure you can pay that bill off completely at the end of the month. It’s just good business sense.

5. Burying your head in the sand - Those credit card bills are not going to magically disappear, so do not ignore them. Face them and fight - even the old debts, even the so-called “written-off debt,” can make your life a living nightmare. So negotiate, settle and pay them off quickly in one or two lump sums, and whatever you do - keep very thorough records throughout the process of settling your debt.