When you look at your credit card bill each month, do you ever wonder when you will get to pay it off in its entirety? Are you ever tempted to withdraw your savings and pay it off now?
Having a credit card can be extremely beneficial, especially when you have to make big purchases. If you are not paying attention, real life can be quite a shock when the credit card bill comes, and you’ve racked up thousands of dollars in purchases. I’ve been there before and sometimes when my credit card is carrying a balance, I’m often tempted to dip into my savings to pay it off completely.
Unfortunately, this is not sustainable in the long run because there are simply too many variables to consider before deciding to pay off your credit card in one go. Carrying a balance is not the best thing to do, and it will cost you more in the long run. However, in the short term, it might be the best option, given certain circumstances.
Reasons Why You Should Not Pay Off Your Credit Card Bill
1. If you are making regular, unnecessary large purchases and not in control of your spending, paying off your credit card bill when it’s due could be disastrous. It is simply masking a problem where you are simply spending ridiculous amounts of money with little or no control. And this could go on and on for months on end or until something unexpected throws a spoke in the cycle and thrusts you into a financial mess.
2. Another consideration is your other financial obligations. It is not recommended to forego paying other expenses just to cover a credit card bill. This is especially true if your credit card bill is filled with wants and not needs, that are not relevant or necessary for living. If you attempt to ignore your other expenses to pay off your credit card, you could severely damage your credit and end up in a worse financial situation.
Benefits of Paying Off Your Credit Card Bill in Full
1. One of the benefits of paying off your credit card is that your credit score will improve. Your total payment ratio, which is how much you pay over the minimum payment required will increase. Also, your credit utilization ratio, which looks at how much debt you have in relation to your credit, will also improve. Both of these metrics can impact your credit score, especially if you clear off your credit card debt.
2. Another benefit of paying off your credit card in full is that it will free up cash for you to use for something else. You can use the extra cash to pay off more debt, increase an emergency fund, increase your savings in a regular savings account or an investment account or invest in a business. When you pay off your credit card debt, you are avoiding paying the monthly interest rate, that could be more harmful in the long run.
How to Pay Off Your Credit Card Bill
When you’re faced with a large credit card balance, it’s pretty hard to believe that you can get rid of that debt. There are many strategies that will help you to get rid of your credit card debt and pay it off in full. You can either choose Dave Ramsay’s Debt Snowball Method or the Debt Avalanche Method. I’ve used both of them and I can attest to their success. Whichever methods you choose, keep the below tips in mind as you start chipping away at that debt.
1. Pay your credit cards on time and avoid fees.
You’re already paying a premium to borrow the money. Set reminders in your phone or on your computer or make a plan to pay the bill as soon as you receive the notification that it has been generated.
2. Pay more than the minimum.
If you resolve to pay only the minimum payment as stated on the statement, you will be paying that bill for ever. The financial institution will keep on adding interest to the balance, which will keep your balance high.
3. Stop using the card.
By making additional purchases on the card, you are setting yourself up for failure and making your bank very happy. If you have to use the card, you must ensure that you have the cash ready and waiting to cover the purchase.
If you have are successful at paying off your credit card, congratulations! However, now is not the time to rest. The hard work is just beginning, because you have to work on becoming disciplined so that you will not find yourself in credit card debt again. Are you up for this new challenge and can you avoid making the same credit card mistakes?