Monday, 16 October 2017

Many people who find themselves in unmanageable credit card debt say, "It just snuck up on me."

But chances are there were warning signs they either were unaware of or chose to ignore. Here are seven red flags that indicate credit card debt is mounting:

1. Not opening credit card statements

As Mark Twain said: Denial ain't just a river in Egypt. If you can't face your credit card statements each month, you probably already know you are in over your head. 

2. Using credit for daily needs — with no payoff plan

Charging all of your daily expenses to a card can be a great personal finance tool that makes it easy to track and budget expenses — and reap travel, shopping, and cash rewards. But if you're paying for your phone, groceries, and basic needs on credit and carrying over a balance every month, you are likely living beyond your means. 

3. Using a credit card to pay the minimum on another

If finances are so tight that you can't afford the minimum monthly payment, you could have a problem. 

4. Getting cash advances every month

Emergencies happen, and a cash advance once per year or less is not the end of the world. But frequent credit card cash advances to pay for daycare or groceries are a financial red flag. 

5. Maxing out cards

Have a card that is maxed out? More than one? Uh-oh. Maxing out cards will affect your credit score and should be a warning to reassess your spending habits. 

6. Not knowing interest rates or fees

If you don't actively manage your credit cards and credit history, you are floating down the denial river on a disbelief raft that will burst at any moment. Open those statements, write down the balances, APRs, annual and late-payment fees, and start paying attention. 

7. Allowing balances to grow with no pay-off plan

If you are not actively managing your debt, and that debt grows each month, you may be avoiding some hard truths about your financial situation. Could you take a second job and use the debt snowball method? Or does it make more sense to consider debt consolidation loan? It's always a good idea to discuss your options with a trusted and well-qualified financial adviser to determine what's best for your situation. 

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