Reviewing your credit card statement may help you curb debt
Credit card debt is a pervasive problem in the United States, and while some people may rack up high bills due to circumstances beyond their control – such as a job loss or medical bill – a more common reason is living beyond their means and overspending. When individuals see their balances growing and credit slipping, there may be a simple tactic they can use to start curbing their credit dependence: reviewing their credit card statement.
Many people have switched to online billing, and while this may add more convenience, few consumers actually take the time to open up and review their monthly activity. This simple task is an overlooked one, but knowing the details of their account and gaining insight into their spending may quickly encourage consumers to change their spending behaviors. There are several areas borrowers should examine when it comes to reviewing their statements.
Consumers should check the corner of their statements for the disclosure box that explains how long it will take borrowers to pay off their debt if they are only making the minimum payments. This box can be a harsh reality check for consumers who are overspending without thinking realistically about how they will eliminate their balances. Others may simply have underestimated how long it may take to pay off – especially once interest is calculated into their total amount. In many cases, it may take years or even decades depending on the balance and interest rate, so consumers should pay close attention to these details.
Why is your balance climbing?
It’s also important to review the items purchased with the credit card. Borrowers may not realize how much their Friday night dinners out or their clothing habits are costing them until they review their transactions. Therefore, it’s important that consumers understand how daily expensive or poor habits are affecting their balances and make a plan to cut back on credit and pay with cash.
Many credit card users may be aware of their balances and their available credit limits. However, they may not realize that this ratio impacts roughly 30 percent of their credit scores, and that carrying high balances may drive down their rating. For example, if consumers have a credit limit of $1,000 and carry a $500 balance, it may not initially seem that harmful, but they are actually using 50 percent of their available credit. This can greatly lower their score if they don’t pay down their balance and keep it low.