Credit cards are a financial tool. When used properly, they can make your life easier, but when misused, they can be hazardous to your financial health. Like many in 2010, I fell into the trap of charging more than I could afford. For me, the danger of credit cards was that I didn’t keep track of how much I was spending. For some reason, I didn’t pay close attention to either the number of purchases I was charging or the amounts of those purchases when I used my credit cards. I was very careful to stay under my credit limit because I didn’t want to be charged a fee or hurt my credit score, but when the limit is a few thousand dollars, that’s not enough.
However, the real issue isn’t how much debt was being accumulated; it’s how quickly the debt is being repaid. In my case, I initially paid my credit card bill in full every month so I didn’t think I had a problem. Indeed, this is the ideal situation- to have no debt. But in order to do this, I couldn’t save much. So when a few big expenses came my way, I had to put them on my credit cards because I didn’t have any savings to pay for them. That made my credit card debt too high for me to pay off each month so I started carrying a balance. The interest piled up and it became difficult to break free.
But credit cards can also be a useful financial instrument that, if used responsibly, can help a troubled financial situation like mine. An old credit card that I rarely used offered me a balance transfer with 0% interest for a year. I took the offer and moved my debt all into one place where I could pay it back without interest slowing me down. I’ve budgeted so that before the 12 months are up, I will have paid back the entire amount. However, the key part to my story of getting out of credit card debt is that I budgeted. This year, I started paying very close attention to everything I bought and I switched to using cash as much as possible. And the more attention I paid to my finances, the less desire I had for frivolous spending. From now on, I’m going to use my credit cards responsibly.