Knowing how to to use our credit cards to our advantage is one thing. If we do not know how to handle and pay the credit card bill, all the benefits we reap will come to naught.
Some time back, I had a conversation with a colleague and was surprised to find that she has been paying minimum sums on her credit card bills. While I am in no position to comment on this, as best as I could, I offered her an advice – to stop paying the minimum of the credit card bill and pay off in full instead. If she has difficulty doing so, she could seek help from those companies that offer credit negotiation help with the banks. I believe her situation is still not as bad as I’ve seen with some other people and there is still hope for her to turn around. While she brushed my advice off, saying that she had no choice, I sincerely hope she’ll seek help asap.
This is the dangerous thing about credit. It is a double edged sword. It could either aid you or kill you financially. Use wisely, you will stand to gain from it. Use it the wrong way, it could kill you slowly but surely.
A late payment on your credit card will incur a late payment charge as well as further finance charges. All these are already considered unnecessary expenses in my opinion. If you are just paying only the minimum sum(s) of your credit card(s), the unpaid amount will incurred additional finance charges and if left unpaid, this additional finance charges will incur further finance charges come the next month and before you know it, you don’t seem to be able to reduce the outstanding amount even though you’ve been doing what you have been doing. This is the horrendous part of what is known as the compounding of the charges.
And this is why never ever pay only the minimum sum on your credit card. Pay off your bills in full. Don’t ever let compounding takes place on your bills.
If you realise you have problems paying off your credit card bills, there is mainly one cause to it. You are overspending and it’s a case where your income is less than your expenses. Solving this takes a lot of effort in pinpointing what goes into and out of your pockets and readjusting your lifestyle. But when you are just paying off a minimum sum on your credit card bill(s), you can safely be assured that you are digging a deeper and deeper hole for yourself, burying yourself in more and more debts.
So the number one thing to do if you are in such a situation is to seek help and negotiate with the credit card companies. Why? This is to prevent the buildup of unwanted financial charges from compounding against you. Once this part is settled and stabilise, only then would you have more time to look into adjusting your expenses and repayment plans.
