According to the Federal Reserve Bank of New York, household debt is up to $17.94 trillion. Credit card debt increased by $24 billion to hit the $1.17 trillion mark—a staggering number.
The rising interest rates on credit cards are undoubtedly contributing to these major increases. According to LendingTree, the average APR for all new credit card offers is 24.61%.
Considering those astronomical numbers, here are some tips for managing credit cards and credit card debt to help you escape those statistics.
5 tips for managing credit cards
Even if you’re a veteran credit card user, these tips still might come in handy.
1. Pay your balance in full whenever possible
It sounds obvious, but it’s easy to let balances roll over into the next cycle with the mindset of, “I already paid the minimum. I’ll get it next month”. But each month you let that balance roll over, the more you’ll owe due to credit card interest.
If you have the available cash to pay off your credit card balances, consider doing it when able. Your future self and wallet will thank you.
There are also prepaid credit cards, sometimes called debit-credit cards, that require you to pay down your balance each month so there are no interest charges. These cards are designed for beginners and build credit without the risk of accumulating debt you can’t repay.
2. Autopay might be a new best friend
I’m not a fan of setting up autopay on every bill, but for credit cards, it’s hard to argue against it. With their high interest rates and the damage a missed payment can do to your credit history, auto payments on credit cards are a smart move.
For many credit card companies, you can set up autopay for the minimum payment or the entire owed balance. Choose the option that makes the most sense for you, but if you can afford it, consider the full balance option for peace of mind and interest savings.
3. Avoid having too many credit cards
You’ve likely heard multiple answers to this question: “How many credit cards should I have?”
My answer: As much as you can reasonably handle, minus one.
The reality is you don’t need a credit card for every spending category. If you travel frequently, a travel credit card can make a lot of sense and offer savings, but if you fly maybe once or twice a year, you can probably skip the travel card.
Credit cards are great tools, but you probably don’t need seven or eight. At the most, I would recommend two or three for common spending categories, such as everyday shopping rewards or travel.
4. Rewards don’t always equal savings
Sometimes, a credit card’s annual fee, interest charges, and cashback maximums cancel out potential rewards.
For example, if you have a credit card with a $100 annual fee and a $200 yearly cashback rewards cap, you’re only “saving” $100 per year on purchases. Additionally, that’s assuming you pay off your credit card balance every single month and don’t pay a penny in interest charges. Even further, that’s also assuming you hit the cashback maximum earnings for the year.
Read the terms and conditions carefully, know your cashback categories and limits, and consider interest charges and annual fees before choosing the best rewards card for you.
5. Prioritize high-interest debt
If you carry balances on multiple cards, focus on paying off the one with the highest interest rate first to save money over time.
This method is called the avalanche debt payoff method. By focusing on debt that accumulates faster, you’re saving yourself more money in the long run. You can also consider debt consolidation options to help.
You’ve got this
Credit card companies want to make money, and you want to save money — don’t let tempting credit card rewards cloud your judgment.
Protect yourself, your wallet, and your credit score by staying on top of payments and only taking on credit you can afford and manage comfortably.
