5 Simple Steps To Recover From Credit Card Overspending
Credit card debt is incredibly easy to run up. While a hefty credit card bill doesn't mean anything about you as a person, it does mean you'll need to tighten your belt to get through the next month or two.
Here's how to bounce back after you've charged too much on your card, and ensure you won't make the same mistakes again.
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1. Don't Miss Payments
When confronted with a credit card bill, it's normal to want to go into hiding. Have you ever not opened the envelope that contains your monthly statement or ignored a notification that payment is due? Fight that urge and do your best to make a payment right away.
Missed payments don't just drive up your costs; they drive down your credit score, too. If you miss more than one payment, it could take your score a long time to recover.
2. Examine Your Spending
Now that you've made a payment, it's time to take a cold hard look at your spending. The overall amount doesn't tell the whole story. What you'll want to do is think about which areas you've spent the most in. Is it food? Entertainment? Decorative candles?
Noting what you spend on and where can help you find areas you can reduce spending. That way, you can pay down your debt faster and start saving for your future and emergencies.
3. Create a New Budget
After paying your bills and going over spending with a fine-toothed comb, the most challenging part of bouncing back is creating a budget. More importantly, you need to create one that works for you. If your new plan to cut back isn't realistic, what motivation will you have to stick to it once the initial sense of accomplishment fades?
If you're spending too much on "fun" areas of your life, find ways you can still do the things you enjoy while cutting back incrementally. You won't stick to a budget that has you never ordering out again, but you may feel better about one where getting delivery once a week is the new normal.
4. Use Less Available Credit
This may sound counterintuitive, but spending up to your limit isn't actually great for your credit score. In fact, if you're consistently close to your balance limit, your credit utilization rate could also be limiting you from getting the things you really want.
Aside from making sure you make your payments on time, keeping your balances low is a good way to raise your credit score and ensure you're getting the best deals on loans and financing for the bigger purchases you make.
For a long time, the rule of thumb has been to use no more than 30% of your limit in order to keep your score at its peak. It may be a bit more complicated than that, but the general rule still holds: The lower your balance, the higher your score.
5. Avoid Impulse Purchases
Having credit card info stored in your phone makes buying things more convenient than ever. Consider noting the things you want to buy, then giving it a few days before you actually type in your credit card number or tap your phone at the cash register. You may not get the dopamine rush of buying something new, but you won't have to wince when you open your credit card bill, either.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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