Most people don’t get into serious credit card debt overnight. Instead, things go wrong little by little until they realize they’ve got a serious problem. 
The first credit card mistake is not paying attention to your cards and balances. Your debt can turn into something serious and not so small.
If you’ve ended up in credit card debt, it can seem overwhelming. Even though it can be painful, be sure to find all your debt and track it.
The good news is that credit card debt is almost always manageable if you have a plan and take disciplined steps to reduce it.
Seventy-five percent of Americans claim they don’t make major purchases on their credit card unless they can pay it off immediately. Yet from looking at actual spending behaviors, over 70 percent of Americans carry a balance, and fewer than half are willing to reveal their credit card debt to a friend.  
Those numbers are an indication that American consumers are ashamed of their debt levels, says Greg McBride, senior vice president, chief financial analyst at Bankrate. He told me, “They are more willing to give their name, age, and even details of their sex lives than provide the amount of their credit card debt.”
Really? Their sex lives? If this is you, let me know. I have a few single friends who’d like to meet you.
This shame means that those in debt often don’t educate themselves on how to stop the madness. A lot of people end up using credit card scripts to normalize their debt in every day life. Instead, they fall victim to the credit card traps including nefarious company practices, which prey on the uninformed—and the undisciplined. These companies have become very good at extracting more money from us, and we’ve become very bad at knowing enough to say no.
For instance, the number one mistake people make with their credit cards is carrying a balance, or not paying it off every month.
Astonishingly, of the 125 million Americans who carry a monthly credit card balance, half of them pay only their minimum monthly payments. Sure, it’s tempting to think that you can buy something and pay it off little by little, but because of credit cards’ insanely high interest rates, that’s a critical mistake.
Let’s say it again: The key and number one credit card rule to using credit cards effectively is to pay off your credit card in full every month. I know I said that casually, in the same way someone would ask you to pass the salt, but it’s important. Ask your friend with $12,000 in credit card debt how it happened. Chances are he’ll shrug and tell you he decided to “just pay the minimum” every month.
I used my credit cards for everything and paid the monthly minimums. That plan left me with maxed-out cards. I opened new 0% balance transfers to try to pay down the debts. Since I was so far over my head and didn’t have any emergency cash funds, I used the credit cards I had to pay for things I truly needed. I wound up owing pretty much every major creditor you can think of, and still do. The interest on my debt crushed me. Just because you have room on the card doesn’t mean you have room in your budget!!!!
I’m not going to belabor the point, but you would be shocked by how many people I talk to who charge purchases without knowing how much they’ll actually end up paying once interest is figured in. 
Paying the minimum amount on your credit card is the grown-up equivalent of a little boy letting the school bully take his lunch money on the first day of school, then coming back with his pockets jingling every single day afterward.
Not only are you going to get your ass kicked, but it’s going to happen again and again. By learning how the system works, though, you can figure out how to avoid the card companies’ traps and get out of debt more quickly.
THE MOMENT I REALIZED I COULD PAY OFF MY DEBT
I asked my readers about the moment when they realized they could pay off their debt. Here’s what just a handful of them said.
The major turning point for me was when I got serious with my girlfriend. She made about a third of what I made, but she had about a year’s salary saved up. I was ashamed to have $40,000 in debt, so I started applying the IWT principles to pay down debt and accomplished that inside two years.
Debt was something I had got “used to”—my lifestyle was short-term and reactive rather than planned. I was so used to living paycheck to paycheck, I hadn’t experienced the freedom of being able to make conscious financial choices. Now money is a tool, not my slave master.
Oh man, debt absolutely SUCKED. I remember crying about it (multiple times). I had debt for all of in-state college, my $9,000 boob job, my $3,000 mattress, and my daily mall shopping spree habits. I was so unhappy and clueless. When I chose to turn my life around, your book was one of the first I bought, and it really woke me the hell up. I felt wealth coming into my life just by reading it, haha. I am now completely debt-free and started a Roth IRA.
I lacked confidence and felt like it was holding me back from taking advantage of all life has to offer. After reading IWT (and now living debt-free!), I have more confidence and spend money on experiences, people, and possessions that I value.
If you’ve found yourself in credit card debt—whether it’s a lot or a little—you have a triple whammy working against you:
■ First, you’re paying tons of high interest on the balance you’re carrying.
■ Second, your credit score suffers—30 percent of your credit score is based on how much debt you have—putting you into a downward spiral of trying to get credit to get a house, car, or apartment and having to pay even more because of your poor credit.
■ Third, and potentially most damaging, debt can affect you emotionally. It can overwhelm you, leading you to avoid opening your bills, causing more late payments and more debt, in a vicious circle of doom.
It’s time to make sacrifices to pay off your debt quickly. Otherwise, you’re costing yourself more and more every day. Don’t put it off, because there’s not going to be a magic day when you win a million dollars or “have enough time” to figure out your finances. You said that three years ago! Managing your money has to be a priority if you ever want to be in a better situation than you are in today.
Think about it: Credit cards’ high interest rates mean you’re likely paying a tremendous amount of interest on any balance you’re carrying. Let’s assume someone has $5,000 in debt on a card with 14 percent APR. If Dumb Dan pays the 2 percent monthly minimum payment, it will take him more than twenty-five years to pay off this debt. No, that’s not a typo—it’s really twenty-five years! Over the entire process, he’ll pay over $6,000 in interest, more than the original amount he spent. And that’s assuming he doesn’t rack up more debt, which you know he will.
If you’re outraged, you should be: This is how people can spend their entire lives in credit card debt. You can do better.
Smart Sally, by contrast, is sick of her debt and decides to get aggressive about paying it off. She has a few options: If she pays a fixed amount of $100 per month, she’ll pay about $2,500 in interest, making her debt-free in six years and 4 months.
This shows why you should always pay more than the minimum on your credit card. There’s also an added benefit to doing that: It fits in beautifully to your automation system, explained in Chapter 5.
Or maybe Smart Sally decides to pay a little more — let’s say $200 per month. Now it takes her 2.5 years to pay off her debt, including about $950 in interest payments. All from a tweak to her payments. Or what if Smart Sally gets truly aggressive and pays $400 per month? Now she’ll pay off her debt in one year and two months, totaling just over $400 in interest payments.
That’s just from paying $100 or $200 more per month. Don’t have $200 extra? How about $50? Or even $20? Even a tiny increase in how much you pay every month can dramatically shorten your time to being debt free.
If you set up automatic payments (which I discuss here) and work your debt down, you won’t pay fees anymore. You won’t pay finance charges. You’ll be free to grow your money by looking ahead. In the credit card companies’ eyes, you’ll be a “deadbeat,” a curious nickname they actually use for customers who pay on time every month and therefore produce virtually no revenue.
You’ll be worthless in their eyes, which is perfect in mine. But to beat them, you have to prioritize paying off whatever you already owe.
I spent four years in college racking up debt that I was certain I’d pay off easily once I started working. I spring-breaked in Las Vegas, Mexico, and Miami. I bought Manolo Blahnik shoes. I went out several nights a week. I had no idea then that I’d spend five post-college years paying that debt off—five years in which  I could not vacation, could not buy fancy shoes, and could not go out very much at all. So on the day when I sent my final payment to my credit card company, I decided that that payment would be my last. I promised myself that I would never go back into debt again.
Paying your card off late or partially. Late or missed payments can lead to higher fees. This is a common credit card mistake typically happens when you don’t pay on time. Not paying your card in full can have consequences too. 
Risk of harming your credit score. Credit cards have an impact on credit. Use yourcards correctly and you can increase your score, but if you make a mistake—like missing a payment for 30 or more days—your credit score will drop.
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To Be Rich ©2022

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