Know the Signs: 5 Questions to Ask About Your Credit Card Debt

As rising interest rates continue, it can be a good time to consider questions about your credit card debt.

Many people take stock, review achievements and challenges, and make a plan for a positive new year.

If you are dealing with additional or unexpected debt, you’re not alone.

You may have needed to use credit cards to manage your bills, and now may be wondering how it has affected your financial picture. Most of us have experienced challenges with managing debt at some point. However, if you create a plan, you can pay down debt, save money on fees and interest, and make progress toward your financial goals.

As outlined in the video above, there are five signs that signal your debt may become a challenge.  These cautionary signs can help reveal opportunities to improve your financial health and wellness.

Some people find managing $1,000 dollars of debt a struggle, while people with higher incomes can easily manage quite a bit more. If you do not know your total debt, and your debt-to-income ratio, that can be very telling.

As we look to manage debt in a time of rising interest rates, getting a clear picture of how much debt you have is the first step in creating a healthy plan to financial wellness.

Most credit card statements include a chart outlining how long it is going to take to pay off the debt. Seeing in print that it will take 10 to 15 years to pay off debt can be very stressful. It is also a clear warning sign that you may need to develop a positive plan to pay more than the minimum.

Many people find it helpful to understand how to use credit cards wisely. Paying only the minimum each month extends how long it takes to wipe out your debt and adds considerably to the amount of interest you pay. Minimum monthly payments can be a short-term approach to dealing with financial troubles — because you are keeping up on bills — however making more than the minimum payment each month helps avoid digging yourself into a financial hole.

If you are saving for an emergency home purchase or paying off high-interest debt, a simple plan will help you meet your goals. As an example, by managing debt, you ensure that your financial well-being does not suffer.

It is not uncommon for people with credit card debt to only pay the interest on the amount borrowed, instead of planning to eliminate the debt altogether. When considering your overall financial picture, consider a deb management plan.

If you are facing uncertainty about how to cover costs for monthly living expenses, one tempting  “quick fix” is a credit card cash advance, especially in the face of unexpected income loss or other emergency situations.

But keep in mind, cash advances will have a higher Annual Percentage Rate (APR) than standard purchases. Also, credit card companies often charge a transaction fee on the borrowed amount. This can add a lot to the cost of borrowing, making it even more difficult to pay off in the long run.

As you reach limits on your credit card, minimum payments increase, and often your creditor will raise your limits, which adds to the potential for even greater debt.

If you’ve hit the maximum amount on credit cards, it is time to take a hard look at where your money is going and make a plan to change any habits that are not beneficial to your financial health.

Maybe you spend too much of your income on housing, car payments and living costs. It may be time to reevaluate. Or the solution may be as simple as reducing overspending on entertainment and discretionary items like new clothes or travel, until you have your budget under control.

Replacing your old habits with new, healthy ones can help you pay that debt down.