Managing Credit Debt

Turning to credit cards is a common mistake that many consumers make when faced with a cash shortage.  In particular, those who have faced unemployment situations in the past few years and found their savings accounts depleted prior to finding a new job have relied on credit cards.  While some credit debt can be good, racking up a lot of credit debt can be dangerous, especially in an already unstable financial situation.

Credit Cards Charge Interest

A lot of people forget that credit card companies charge interest for the convenience of using their cards.  This means that credit cards are not a straight trade for money.  Rather credit card purchases cost the amount of the item plus whatever the interest rate of the credit card is, if the debt is not paid off in full every month.  Having a lot of high interest credit card debt also lowers one’s credit rating.

Credit Cards are Not Magic Money

As a rule of thumb, credit experts recommend that credit card users not accumulate more credit card debt every month than they can afford to pay in cash.  Quite simply, if one is using more credit every month than one earns, one is essentially spending one doesn’t have.  If one doesn’t have it now, there should be a clear cut plan for how one will get it in the future because eventually money will need to be paid to resolve the debt.

Consider Alternatives

Before relying heavily on credit cards during a financial slump, consider alternatives such as a second job or liquidating some belongings.  These can both be great ways to raise some emergency cash to keep you going through a tough period and minimize excessive credit card debt.