If you have been reading run-of-the-mill personal finance advice, you are probably aware of the supposed ‘benefits’ of cutting your credit card into two and throwing it into the dustbin. The good news is that you will feel free of financial obligations instantly. The bad news is that it will turn to instant regret as well. You probably don’t even realize how much this small move could hurt your finances. You can come to Lucky Loans is you ever feel the need for instant financing.
Planning not to have a credit card ever again
We would like to advise you against doing this kind of ‘personal finance masterstrokes’. Credit cards are probably your first adventure (or misadventure) with debt. Some people go out and out, maxing out their cards and being unable to pay them back the next month. As it is a method of rolling credit, it will keep piling up over the next several months and wreak havoc on your life.
However, not having a credit card at all isn’t a good idea. One of the most important reasons why you shouldn’t do this is your credit score. Closing your old card will hurt your credit score. It will show that you do not have sufficient skills to manage a debt. Also, older cards usually have better standing on the score. Closing them will leave your account open to new debts which will lower your credit score until they mature.
Debt issues with credit cards
A lot of people feel powerless when using plastic money. It is easier to come by and spending too much on ‘wants’ and ‘desires’ makes us all fall into a debt trap. If you follow some discipline, then getting rid of this debt and living a good life shouldn’t be too difficult. Here is what you have to do.
First, find out what is the minimum pay for your card. Make sure you have enough money every month to furnish this payment. Second, find out where you spend most of your money. Is it a shopping mall, a pub or home delivery of pizza? Once you have found your splurge, ensure that you get rid of it of minimize it. If you spent 500 pounds on clothes last month, spend no more than 250 this month. Finally, make a clear and easy to follow budget that can help you in keeping your balances low. Never max out any of credit cards.
A few people use cash or debit cards for making all their purchases and save the credit instrument only for specific purchases. This helps them in keeping all their purchases below 30% of the available credit card limit. The card is used to a minimum, stays on the credit report, and keeps the score high while ensuring that there is enough money for any emergency payments.
A second method is to use your card for all purchases and save a majority of their income. This way, they get to keep the debt going, furnish it every month in full and still get to save or invest their income.
Which method are you going to use? Let us know in the comments below.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.