Some people donâ€™t always make the best decisions when it comes to credit cards. If youâ€™re one of these people, you could end up with so much credit card debt that you might have to consider getting help from a professional debt relief company. We know this isn’t necessarily easy to hear, but sometimes tough love is needed to shake debtors by their lapels and get them to understand that they need to make some fundamental changes with their finances in order to avoid more serious problems later on.
Before things get that bad, however, there are five ways you can check to see if your credit cards pass the stress test. If you fail any one of these tests, you should probably rethink how you use your credit cards, before you end up in over your head with debt.
1. Are you operating close to your credit limit?
If any of your credit cards are maxed out or near their credit limit, then youâ€™re operating in the credit stress zone. Cut back on your spending immediately and take your credit cards out of your wallet and put them someplace safe so you canâ€™t use them on impulse and overspend when youâ€™re out and about. Remember, every time you use a credit card, youâ€™re taking out a loan. If you canâ€™t afford something with cash, you canâ€™t afford it.
2. Do you open new lines of credit to get discounts and other offers?
If youâ€™re signing up for credit card accounts â€” especially store credit card accounts â€” to get a discount off your first purchase, a low introductory APR, free airline miles, or some other kind of offer, your credit stress test will show a big red flag. These offers are known as â€śteasers,â€ť and theyâ€™re designed to do one thing and one thing only: lure you into more credit card debt. Most cards that offer deals are only temporary, as is the case with first-time shopping discounts and introductory APRs, and rewards cards typically charge higher interest rates. If youâ€™re already struggling with credit card debt, resist the temptation to open any new accounts.
3. Are you using credit cards to cover the gap between paychecks?
If youâ€™re living paycheck to paycheck, the worst thing you can do is use a credit card â€” which is the same thing as taking out a loan â€” to cover the gap between paydays. If youâ€™re doing this, youâ€™re failing your credit stress test. If you canâ€™t afford your monthly expenses, paying for them with high-interest credit cards will likely only result in paying eve more for the money you spend, on top of things like late payments, over limit fees, or the inability to make a minimum monthly credit card payment at all. And then youâ€™ll be in real trouble.
4. Do you wait until the last minute to make credit card payments?
Waiting until the last minute to make credit card payments is another red flag on your credit stress test because it probably means you donâ€™t have the money you need to pay off your debts. Making eleventh-hour payments because youâ€™re a procrastinator or were busy and forgot is one thing, but hurrying to scrape together enough money to make a minimum monthly payment is a clear indicator that you donâ€™t need to be using credit cards at all. Shelve the credit cards and go the cash-and-carry route to avoid having a credit card heart attack.
5. Are your credit cards declined when you use them?
If youâ€™re getting declined at the cash register when you try to use your credit cards, itâ€™s a major-league failure of your credit stress test. Not only are you operating near your credit limit â€” which means youâ€™re carrying a high monthly balance â€” but you obviously donâ€™t know how much available credit you still have. That means youâ€™re simply not paying attention to your finances. And not paying attention to your finances is eventually going to get you into a heap of trouble. Retire your credit cards to a safe place and work hard to pay them off, little by little if you have to, while using only cash to cover monthly expenses.
Credit cards arenâ€™t there to help you pay for things you canâ€™t afford, theyâ€™re there to help you more conveniently spend money that you already have â€” although credit card companies donâ€™t see it that way; they love it when cardholders carry a balance and pay lots of fees. And credit cards arenâ€™t for everyone. Some people have a hard time using them while not over extending themselves and going into deep debt.
If you answered yes to one or more of these five questions, then youâ€™ve either failed your credit stress test or are close to failing it. Our advice? Dump the credit cards, pay them off, and only use them for absolute emergencies if you canâ€™t work out a payment plan when you get into a bind. Not only will your credit stress level improve, but so will yours.
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