When the days get longer and the temps get warmer, it seems like it gets easier to splurge on getaways, concerts, activities for the kids, or simply on hitting every rooftop restaurant you can before the season ends. But all this summer fun won’t be worth it if it ends up breaking your budget and landing you in serious credit card debt.
But don’t fret — if you feel you’re using that plastic too much this summer, you have some options.
1. Rein in Your Spending
“The very first step … is to create a spending plan to gain a firm understanding of the funds coming in and going out,” Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said in an email.
If you can see where your weaker points are and either cut back or re-assess your budget to make it work so you don’t go into debt, this may help your situation. And if you’ve already landed yourself in debt, figuring out a payment plan should be your next step.
To do this, Nitzsche recommended trying to avoid using credit “as an extension of income for everyday living expenses.” He said that if you’re doing this, you’re going to have a harder time establishing and implementing a payoff plan because it will require “paying off all the new charges each month, plus a substantial payment toward the principle of the previous balance.”
Plus, “on top of interest charges (and in some cases late/over-limit fees), this can present a real challenge,” he said.
“If you find yourself struggling to make minimum payments … then it’s time to take action and seek help,” Nitzsche said.
2. Consider a Balance Transfer Credit Card
“A balance transfer can be a good idea under certain circumstances,” Nitzsche said. Those circumstances could include having only have a moderate amount of debt that could be paid off faster because of the limited-time reduced interest rate that accompanies most balance transfer credit cards. And then, of course, there’s the fee that accompanies most transfers — typically 3% of the total amount.
If you decide you want to get a balance transfer credit card to help you get back on track, there are some things you need to keep in mind.
“Applicants should be aware of the ‘teaser rate’ timeframe and make a plan to have the debt paid off by the expiration,” Nitzsche said. If not, you may end up right back where you started from. (Note: most of these timeframes are around 18-24 months, but you should read the fine print carefully with any card you’re considering.)
He added that it’s also important to know that if you aren’t “approved for the full balance of [your] existing debt, that the new creditor may automatically transfer the maximum possible and then [you] will have two creditor payments.”
Nitzsche also warned about the effect getting a new balance transfer credit card could have on your credit score, saying “opening a new account and then maxing (or nearly maxing) it out with a balance transfer will ding their credit score.”
If you are considering this option, you may want to read this guide of some of the best balance transfer credit cards in America.
3. Keep an Eye on Your Credit Score
Your payment history is the largest part (35%) of what impacts your credit scores, so if you are unable to make your debt payments on time, or skip them altogether, your credit will take a hit.
On the other hand, if you work to pay down your debt, in turn improving your credit utilization (how much credit you have vs. how much you use), you will likely start to see your scores improve. It’s a good idea to keep an eye on your credit scores so you can track your efforts. (You can see two of your credit scores for free, updated every 14 days, on Credit.com.)
You may also want to review your credit reports to make sure there aren’t any problems, like errors or fraudulent accounts, as they may be damaging your scores as well. You can get your free annual credit reports from AnnualCreditReport.com.
More on Credit Cards:
- Credit.com’s Expert Credit Card Shopping Tips
- How to Get a Credit Card With Bad Credit
- An Expert Guide to Credit Cards With Rewards
Image: Imgorthand
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