How to Manage Revolving Debt Effectively

5 tips to ensure credit lines stay in your control.

Different types of debt have to be managed differently and revolving debts can be particularly problematic for your budget if they’re not carefully managed. Unlike fixed debts like your mortgage or car loan, revolving debts like credit cards don’t have a fixed monthly payment. Borrowing against a credit line provides purchasing freedom and convenience, but it can be tough on your finances if the debt is not carefully managed.

The five tips below can help you manage revolving debt effectively in your everyday budget. Remember, if you’re already struggling with debt, normal tactics and tips like the ones below may not be enough to regain control. Call Consolidated Credit at for a free debt and budget evaluation to discuss your options for debt relief with a certified credit counselor. You can also tell us about your situation through an online application.

Tip No 1: Payments always increase with your balance

Since revolving debts have no fixed payment like a loan would, the payments are based on a formula that’s usually outlined in your credit agreement. In most cases, it’s a percentage of how much you owe in total – for credit cards, that percent averages around 2.5% for most cards.

While this may not seem like much, it can really stack up when you have a significant credit line.   At $5,000 you’re paying $125 – and people borrowing on that kind of scale often run into trouble because you end up with a few thousand dollars of debt on multiple cards. It can overwhelm your budget and leave you counting every penny.

Tip No. 2: Payment in-full should be a primary goal

Even though revolving debts like credit cards usually have a minimum required payment, there is no penalty for paying back everything you borrowed against the credit line during that payment cycle. Doing so usually limits or even eliminates interest charges that would be applied to the debt if you don’t pay it off during the first billing cycle.

It’s particularly that you don’t allow multiple credit lines to carry a balance from month-to-month. This usually means you end up paying more because you’re paying under multiple minimum payment schedules – each one building with interest charges each month you allow it to carry over. If you start seeing this cycle, take steps to reduce your debts strategically.

Tip No. 3: Be aware of high interest rates

Interest tends to be a bigger challenge with revolving debt because the rates tend to be higher since you’re borrow against an open credit line. So while loans can have rates as low as five percent or less, credit cards tend to have rates that can be fifteen percent or higher. The higher the rate, the more the debt costs.

Additionally, if you’re not paying close enough attention to Tip 1 and allow debt to carry over while you meet minimum payment requirements, most of each payment gets eaten up by accrued interest charges. This is why interest rates should help determine which debts you prioritize for payment in-full first in a good debt repayment strategy.

You also need to be aware that credit lines can have different rates for different types of transactions. For instance, taking out a cash advance on a credit card tends to have a much higher interest rate than the same card would apply on a normal purchase. Always be wary of using these types of transactions even though they’re averrable on your credit line.

Tip No. 4: Late payments wreak havoc

Most credit lines come with stiff penalties if you can’t repay them. Not only are there penalties for the late payment, the interest rate applied to the credit line usually gets penalized as well. You can double or even triple your rate by missing even one payment, and by law the penalty interest can be applied for up to six months even if you make every payment on time after that. You also need to be worried about late payments appearing on your credit report.

Tip No. 5: Credit lines affect your credit score

Credit utilization is the second biggest factor in determining your credit score after your credit history. Utilization is how much you use of your available credit lines. In general, your credit score starts to be affected negatively once you start using more than 30 percent of your available revolving credit, but ideally using 10 percent or less of your available credit is actually good for your credit profile.

Again, even though you have the credit line available, borrowing against it too much can be risky for your overall financial outlook. 

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