Financial Education


Credit Card Debt Solution

How Much Credit Should You Have

Financial experts often advise that you spend no more than 15% - 20% of your income after taxes on short-term (typically 12 months or less) credit purchases, such as credit cards and lines of credit (short-term credit does not include your housing costs). For instance, if your monthly income, after taxes, is $1,000, you should have credit payments of no more than $150 - $200.

Warning Signs of Too Much Credit Debt
If you answer yes to any of the following questions, you might be heading into dangerous credit territory.

Do you need to use credit to buy everyday necessities like groceries?
Do you borrow money to pay your current bills?
Are you unable to pay your credit card balances each month?
Are you unable to save enough to cover expected expenses?
Are your credit cards "maxed out" so there is no room to cover emergency expenses?

Simple Ways to Keep Your Credit in Order

Don't charge an item if you can't pay off your credit card bill.
Adding charges onto a credit card that you can't afford to pay off is a surefire way to get into debt over your head.

Don't borrow more than you need.
While it would be nice to borrow extra for some luxury items, until you know how much debt you can handle, only borrow the amount you need and can pay back.

Understand the costs of credit.
Make sure you know your interest rate and any other fees associated with each credit account, including late payment fees.

Shop around for the best deals.
Interest rates, fees, and other payment rules vary widely. Make sure you do your homework and find a deal that fits into your budget.

Keep on top of payment schedules and credit limits.
Late payment and overlimit fees can add up. You could end up paying far more than you borrowed.

Remember that emergency credit cards are for emergencies.
Think about how much you really need something before you charge it on your emergency credit card.