If you have been struggling with bad credit as well as your finances as a whole, it could be that your accumulation of credit card debt might be playing a role in this situation. If you find this scenario is one that you fall into, perhaps it is the time to start taking steps to pay down this credit.
Not completely convinced that paying off your credit card is necessary? – Well, to provide some additional clarity as well as encouragement in this area – here are 3 reasons to clear your credit card debt today!
#1: You’ll Improve your Credit (& Ability to Get a Loan)
Perhaps, the word can is putting things a little mildly. The truth of the matter is that having a large credit card balance can and will likely hurt your overall credit score. As far as credit scores go – when calculated, credit cards that have balances higher than 30-50% of the total credit limit will look poorly on your credit rating. In turn, lenders will look at this fact and may not approve your request for additional credit. For example, in the event you need to take out a personal loan – or even a mortgage this may not be possible.
Ultimately, it is wise to pay down your credit card as much as possible and if you can keep the balance below 30% of your total credit card limit, this can allow you to improve your credit score – not to mention the more likely you are to secure the loan you really need.
#2: You’ll Reduce Your Interest Charges
With a lot of credit card debt, you are are likely to be paying high interest on your card each month. With bad credit, it is often common that even though you are approved for credit, you are likely to have received a higher interest rate. While not always the case – with a high rate and compounded by a high credit card balance – you will be paying a lot of interest over the course of the entire year. Perhaps you are paying $200 or $300 in interest each month without being able to actually pay down your credit card debt.
With that being said, it then makes sense to plan to increase the amount of credit card debt you are paying down each month. By paying beyond just the minimum balance for starters, this can allow you to make more of a dent in your overall credit card debt. By upping your payments – whether making a lump sum payment or making multiple payments off of your credit card each month – this can allow you to reduce the overall amount on your card, as well as lessen the interest you are being charged each time.
Moreover, once you have rather significantly lowered your credit card debt – you may be able to switch over to a credit card with a lower interest rate – again opening more doors for yourself when it comes to obtaining additional credit – and with a much higher level of ease.
#3: You’ll Free up Some Money Each Month
Once you have been able to pay down a decent chunk of credit cards debt, you should also find that you have a bit more money each month. Alternatively, with a lot of credit card debt and high monthly payments – you are likely seeing a lot of your money going towards these payments each month. You may also find that you have very little money left to save after paying off this debt as well as other debts each time as well. Instead by beginning to considerably pay down your credit debt – once a lot of it has been paid off you will be paying less, including interest.
Therefore, with more money to spare at the end of each month you can save more money – and these additional funds can certainly come in handy down the line.
While credit cards are an effective method of enabling us to pay for large ticket items – we also need to be able to pay down these charges with consistency. If you currently have a lot of credit card debt, let these reasons as well as many others not listed here, provide you with the motivation you need to pay down your debt before your financial issues moves too far out of your reach.
In the end, the sooner you start taking this important step, the sooner you can start increasing your credit score. Once you do this – you can move out of a bad credit zone and start having more financial stability – as well as many more credit options available to you.