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Credit cards can be a great resource tool when used effectively. It can also be easy for credit card debt to get out of control if we don’t exercise good habits. The good news is that through some small changes in how we manage our credit cards, good habits can help reduce credit card debt.

#1: Paying Late


Paying late has three major implications:
  • It causes you to carry a higher balance longer which can impact the amount of interest owed.
  • It affects your relationship with the card issuer and your ability to continue to use your card.
  • It affects your credit score and can impact your future ability to qualify for a loan.


Payment history accounts for 35% of your overall credit score. It is also one of the factors that lenders use to determine whether or not to extend credit. The good news: As your credit/debt activity changes over time, so does your credit score. If you’ve made late payments in the past, they won’t haunt you forever. As you continue to pay on time, this has a positive impact on your credit score rating.

Check out our credit health check up.

#2: Making Only the Minimum Payment


Not only does it take longer to pay off credit card debt when making only the minimum payment due, it costs you more money in the long run from the interest you pay over time. While each company can vary, most use a percentage of around 3% of the credit card balance to calculate minimum payment, and your balance is comprised of the total of unpaid charges and previous interest. Based on the average, if you pay more than the minimum each month equivalent to $1,000 in extra payment, you can save yourself in the neighborhood of roughly 10-30% in interest.

To learn more about how your payment is calculated and to see how paying more than the minimum saves you money, check out this article that breaks it down into easy-to-follow steps.

#3: Using to Make Everyday Purchases


Everyday purchases – such as gas, groceries, utilities, etc. – should be built in as part of a monthly budget so that regular necessities can be taken care of from your monthly income. Credit cards are ideally used for extenuating circumstances and special purchases and not as a main source of paying for expenses.

It’s easy to pull out the credit card when at the grocery store to pay for that one or two items so that you don’t have to adjust your checking account or monthly budget. But those little items here and there add up – especially once you consider that you will pay more than the store price once you factor in interest. The two best ways to combat this are:

Learn more about budget practices and how they can help you not only save money but create achievable goals to pay off your debt.


#4: Making Cash Advances


There are multiple ways cash advances can have a bigger negative impact on your finances:
  • With most companies, you begin accruing interest as soon as you take out the cash advance. Some credit cards offer a grace period on paying of the balance for purchased goods, but not for cash advances.
  • Some card companies charge a fee and/or higher interest rate for cash advances than purchases.
  • Some companies apply payment to the accrued purchase balance before applying any payment to the cash advance balance.

(Always read the disclosure and contract for each credit card to understand each company’s interest and payment requirements as these will vary.)

#5: Putting it Out of Sight and Out of Mind


When it becomes stressful to think about bills and debt, it can be easy to begin ignoring the statement details or email notifications when bills are ready. Over time, this leads to greater stress, rush decisions when paying bills, and potentially missed payments. Instead of pushing off opening those statements or emails, look at this as an opportunity to sit down once each month and take some reflective time to look at where and how money is being spent each month. Rather than focusing on the negative impact, focus on a future goal of paying down each credit card one at a time.

The key to getting credit card balances under control is to change spending habits. Taking the steps to make the change is not hard to do, but it will take determination, and self-discipline. It will also take time, so be patient with yourself. It can also help to seek guidance from your financial institution or a certified financial planner to help you develop a plan that works for you. You’d be surprised how much stress can be reduced when you have a monthly financial plan and feel that you have someone helping you stay on track with your financial goals.