Did you know that more than 80% of American households have at least one credit card? And, if you consider yourself to be “Average” then you have at least eight credit cards in your wallet, racking up debt and interest payments.

It’s not easy owning plastic, let alone owning eight cards! Here are my top tips to help you manage your credit card debt.

  • A credit card has to be repaid. Some company has decided that you are responsible enough to lend money to, because you’ll repay it (and then some). If you let them down it will be reflected on your FICO score.
  • A credit card is just that: credit. You may have several credit cards that add up to several thousand dollars, but that is a credit limit. The important thing to remember is that this line of credit is not how much money you have to your name. Your line of credit is actually your potential of debt: the more credit you use the more debt you will carry — debt which must be repaid.
  • Paying the minimum is a bad idea. The “minimum amount due” is a really slick way of getting you to pay off your debt over the course of several decades. It was invented for the sole purpose of increasing the profits of the credit companies. Always pay more than the minimum (and pay off the entire debt in one fell swoop if you can).
  • Fees, fees, fees: if it exists, lenders have found a way to charge a fee for it. There are the obvious fees — late payments, overdrafts, cash advances, replacement cards, extra account statements, etc… — but there are also less obvious fees that can quickly drain your bank account: balance transfers (both to and from your card), speaking to a customer service rep (instead of phone automation), inactivity fees, “minimum balance not met” fees. Even the most trustworthy borrower can succumb to these fees.
  • Leverage your assets. Remember: you are the customer, and you have a right to try and renegotiate your terms. If you want a lower rate, more credit, or different terms then try speaking with your company. Your lender would rather keep you as a customer than spend the money to acquire a new customer.
  • When in doubt, don’t charge it. If you’re struggling to make your payments, then stop charging items on your credit card. You’ll need to change your spending habits. You may also want to roll your account balance over to a card that charges a lower interest rate.
  • If they offer it, take it! Getting something for free from your credit card company is a miracle. If you consider consolidating your credit spending into one card then consider getting a rewards card. Look for a card that will award you stuff you’ll actually use. But, just because you earn rewards points for spending, don’t let your spending habits get out of control.
  • Teach your children. The real cashless society is coming on fast. In fact, for many people (such as me) it’s already here. Every purchase I make is either with a credit card or debit card. Teach them that the little plastic card is not a magical piece of plastic that lets you get whatever you want whenever you want it.

[tags]manage debt, credit card, fico[/tags]