Not too long ago, I used to be comfortable with keeping a balance on my credit card. Here’s the kicker, in all my years of owning a credit card, I’ve always had enough money in my savings account to pay off the debt right away. But I let it sit and sit and would pay it down a little each month.
We’re not talking thousands of dollars either. Just a few hundred dollars that I would chip away at only until it was built back up again with the next purchase. You see, I was not budgeting then and figured I could just pay it off any time I wanted. So why didn’t I?
I was so focused on building up my savings, that I neglected paying off all my debt. The two go hand in hand. The smarter thing to do would just be to pay off my entire credit card before I started saving again. When I finally started regularly budgeting, this whole concept hit me hard. I vowed I would never keep a balance on my credit card again.
I wanted to get into good habits with my money, and keeping debt (especially debt that I could easily pay off) was just not a smart financial decision. Because each choice we make affects the other choices we make, I wanted to get started right away with my good behavior. I would pay off my balance each time I made a purchase so that I would never overspend my money again. I would budget my money so that I would know exactly how much I had to spend on everything. I wouldn’t bite off more than I could chew. And this way, I would reach my savings goals much faster. One little decision could have a big impact.
So, I paid off my credit card balance for once and for all and it’s remained at $0 ever since. I still use my credit card all of the time, mainly just to earn rewards points, but now I always pay it off immediately. A few months after I started doing this, my credit limit doubled from $3,000 to $6,000 – and I don’t believe that is a coincidence for one second. After all, it had been at $3,000 since I opened it years ago. I’m hoping I never have to use it up to the limit, but if I ever have an emergency or need to make a big purchase, it’s a really nice (safety net) option to have.
Some people are against owning a credit card all together. I, however, believe that if you can be trusted to pay off the balance each month, a credit card can be a great tool to build a strong credit history and also open up the door to many deals and savings (like the travel rewards I earn on my credit card, for example). If you’re lucky enough to never have to worry about significant debt (ahem, student loans), then don’t ever make this same stupid mistake. This is a PSA: Pay off your credit limit! If you are holding significant debt, then make a plan to pay it down quickly. And once you pay it down, never let it creep up on you again.
If anyone out there has any good tips for paying down debt, please share!
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