An important part of managing your finances well includes keeping debt levels at a minimum. If you are like the average consumer, it is almost impossible to live completely debt free, however as many people have learned, carrying high interest Credit Card debt can destroy any chance of reaching your financial goals.
Each year we all have the opportunity to start “fresh” and outline our goals for the coming twelve months. This year it is especially important to make debt free living one of your main priorities. Why this year? The first reason should be obvious, the economy is still uncertain regardless of signs of recovery. The second reason to avoid incurring credit card debt in the new year involves the changes happening within the credit card industry itself.
For many years we have become accustomed to a credit friendly society. Using credit cards has become second nature to many of us and some people have become quite adept at playing the credit card game. Moving balances to lower interest cards has been a useful strategy for many years and one that saved thousands if done correctly. This year your moves will be limited and with the addition of new regulations placed on credit card companies, expect fewer perks and benefits from using your plastic.
The following changes should make you think twice before using credit in the new year.
- Fees– It is almost impossible to avoid fees these days and most credit card companies have or will be increasing their fees in the coming months. You can expect to be charged higher amounts for late payments and going over your limit making it especially important to always get your payment in on time.
- Less credit– If you haven’t already seen your line of credit drop, be prepared for lower limits in the future. This will be true for existing accounts or new accounts you may open in the next several months.
- Fewer options– Moving a high interest balance to a zero or low interest card is no longer a reasonable option. The offers which were plentiful just a few years ago are now either non-existent or extended only to people with immaculate credit.
- Benefits not so beneficial– We all love the rewards programs which pay us back for doing what we already do…spend money. Unfortunately the rewards programs might not be as rewarding moving forward.
- Higher rates and payments– Good luck finding interest rates in the single digits anytime in the near future. If you have excellent credit you might see rates in the low teens and if your credit is not so good…..watch out, you’re looking at interest rates in the 30’s. In addition to higher rates, your minimum payment will more than likely increase as well.
The regulations put in place to protect the consumer, will certainly prevent some consumers from making costly mistakes in the future. In the meantime, anyone with balances on credit cards today should consider themselves forewarned. When you restrict the credit card companies ability to make money in one area, they will find another area to make it up.
The only way to avoid debt using a credit card has not changed. Paying off your balance in full each month has and always will be the best way to use credit cards. If you can’t afford to pay the balance- don’t use the card.
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