Friday, 9 February 2018

Maybe you use your credit cards to reward yourself with a splurge or to cover emergency expenses like car repairs.

In the moment, "buy now, pay later" doesn't seem like a big deal. Then you see the bill and realize you spent more than you thought — and you can't pay the balance off right away.

Well, you're not alone. In 2017, more people than ever applied for credit cards, and an analysis by showed U.S. consumers currently owe around $1 billion in credit card debt.

If you find yourself unable to pay off your balance each month, and you're racking up interest and late fees, it's time to take a serious look at your finances. By determining how and why you are using your credit cards each month, and making some changes, you can get off the slippery slope into unmanageable credit card debt.

1. Analyze your spending

Many people have no idea how much money they actually spend each month. Sure, they know what they pay for their rent, utilities, and car. But where the rest of the money goes is often a mystery. However, knowing where your money goes each month is essential to getting control of your finances.

To figure out where your money is going, try keeping a journal of every single cent you spend, whether it's cash, credit, or debit. Even if you put a $1 into a parking meter, write it down.

There are also multiple phone apps and online budgeting programs (many of them are free) to help track your spending. These also make it easy to categorize your purchases — such as groceries, entertainment, health, and dining out — so you can see where your money is going, and where you are overspending.

Most experts recommend you track spending for at least a month to get a clear picture of your spending habits.

2. Find ways to save

Now that you know how much is going out each month, compare that to how much is coming in. If more is going out than coming in (and this is why you are using your credit cards), it's time to find places to cut back.

You probably can't make immediate changes to your housing and transportation expenses. But chances are there are other unnecessary expenditures you can eliminate or reduce. For example:

  • Subscriptions and memberships: If you're not using it, cancel it. Or, can you pay less for a reduced access membership at your gym? Even little tweaks can help
  • Cable TV: Chances are you don't watch all those channels, anyway. Consider a more affordable streaming service.
  • Unnecessary fees: A little organization and utilization of technology can help you avoid costly late fees, penalties, and interest charges.
  • Food and groceries: Little changes, such as bringing your lunch a few days a week, can add up to a lot of savings.

3. Create new habits

Once you've identified what needs to change, find tactics that work best for you, such as:

  • Shop with cash or debit only, no credit cards allowed.
  • Make a weekly grocery list and stick to it.
  • Build an emergency fund by having a small amount — like $25 — transferred directly into a savings account each payday. 
  • Until you have an emergency fund, use credit cards only for real emergencies. 
  • Meet friends for lunch instead of expensive dinners.

Earning more can also help you balance your budget and reduce the need to use credit. Fortunately, in today's gig economy, there are more opportunities than ever to make extra cash, like renting out a room, selling things you don't need, or finding freelance work.

4. Pay off your debt

Now that you have analyzed your spending and hopefully found some places to cut back, you need to focus on paying down the debt you've already accumulated. Most financial experts recommend tackling the card with the highest balance first and always paying more than the minimum monthly payment if possible.


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