Bad Debt Habits

The single most effective way to be debt free is to never accumulating bad debt.  Or learn to change your bad habits that lead to debt so that you can move in the right direction away from debt.    

Frequently transferring balances from card to card.  Although it is wise to transfer a balance that carries a high interest rate to a card with a lower interest rate, but it does not make sense to continuously transfer balances.  Transferring balances as a way to avoid your debt will only lead to worse trouble.  Typically there are balance transfer fees.  So every time you transfer a balance, you incur a fee and then have a higher balance than if you had just left the balance on the first card.  This is true even when the second card has a lower rate.      

Late payments have a high price tag.  Almost everyone knows that making a late payment has an associated late fee.  Yet, when you are trying to pay down your balances, the last hit you want to take is an increase in your balance from a late payment.  What is even worse is that your interest rate will likely increase, so that your finance charges also increase every month making it harder yet to pay down your debt!  Then due to an little known default universal clause in most card terms and agreements, other creditors may even be able to charge an increased interest rate on your other cards too.     

Paying just the minimum payment.  This prolongs the length of time that you pay on your card.  As long as your card still has a balance, you are being charged interest.  You should always strive to pay as much as you can possibly afford towards any credit card debt.  The quicker you pay off the card and stop paying for interest, the quicker you can start using that money elsewhere in your budget. 

Keeping quiet during difficult financial times.  It is possible that you fear calling any creditor with the news that you are unable to make your regular payment.  However, you might just get a nice surprise.  Most creditors are happy to work with you in difficult times.  It might seem like there is some catch, and there is one.  The catch is that the creditors know if you get into worse financial trouble, then you won’t be able to pay them at all.  They would rather work with you before that happens.  Different creditors have different strategies and options available, depending on your situation.  The important point is that you really don’t know until you ask. 

Not checking your credit history.   Some people do not check their credit history because they fear what it contains.  This is a very bad idea.  It is crucial that you are always aware of how much debt you owe and to whom.  The other reason people don’t check their credit history is they don’t want to pay for it.  However, you may also always obtain a free credit report at www.freecreditreport.com.

Spending without a budget enables overspending.  With no budget, you have no good method to control your spending.  The end result is spending money excessively on things you don’t need.  You should create a budget for monthly expenses as well as quarterly and annual expenses.  Having a good solid budget in place will help prevent struggling to pay the bills when they come due.