Getting in trouble: When you use your credit card to fund non-emergency puchases when you are out of cash. *iStock photo
Getting in trouble: When you use your credit card to fund non-emergency puchases when you are out of cash. *iStock photo

Happy New Year!  Are you beginning 2014 with massive credit card balances?   

While there is no quick-fix solution to get out of debt, there may be some small changes that you can make in your financial plan to help you tackle your New Year’s resolution once and for all.  

Read on to find out if you fall into one of these common situations.  

They may just be what have been holding you back from achieving your goal of squashing your credit card debt completely.  

Situation #1: You pay the minimum every month

You must pay more than the minimum payment every month, as much more as you possibly can. 

If you owe a credit card company $5,000 at 18 per cent interest and all you do is pay the minimum each month it will take you over 30 years to pay it off.  

Situation #2: You use your credit card to fund purchases when you’re out of cash

It’s common to think of your credit card as extra cash, partly because it’s so easy to use. We forget that our credit cards very expensive cash.  

At upwards of 18 per cent interest rate, we may end up paying more money to the bank than for the item we purchased.  

The next time you’re in the department store, ask yourself how urgent this purchase is.  

If you can wait, begin a savings plan and work toward saving up enough money to purchase the item.  

Situation #3: You have more than one credit card.

While extreme credit card debt is not ideal, having one credit card for emergencies can be a great addition to any financial plan. 

It can be enticing, however, to have two, three or more cards in your wallet.   This can be a dangerous thing.  

Even if the cards have zero balances, multiple credit cards could possibly cause a lender to question what could happen if the account holder gives in to temptation and maxes them out.

Situation #4: You have a credit card for the wrong reason

You may have one credit card for travel and another for household needs but having a credit card for anything other than emergencies can be counterproductive. 

You might be tempted to ignore the fine print because the card has other attractions, such as a rebate or rewards programme. Keep in mind that credit card companies are businesses and their goal is to make money.   

Situation #5: You’re not rate shopping

If you’re paying the highest interest rate available, you may be missing out on the opportunity to save some money by negotiating a lower rate.   

Give your credit card company a call and negotiate based on your outstanding credit!  

They will usually be willing to negotiate a lower rate for you.  

The key in any plan is staying committed to your financial goals.  

If you pay off your credit card balance, you can focus on rewarding yourself with things like building an emergency savings fund. When you have the excess cash available, your days of using a credit card as a de facto emergency fund will be over. 

Elyse Rayner is a wealth manager for AFL Investments and can be reached at (441) 294-5738.