Managing Debt and Credit

Before you Start

• Get your account statements from your credit cards and other debts.



• Review the interest rate you pay for each debt.



• Take a good look to your spending habits.



• Think about the ability to stop using credit on regular basis and what changes are you willing to do.

Managing Debt and Credit

Using credit today is confidence on yourself that you will be able to pay your debt in the future. Today debt and credit are part of our everyday life. Some people use credit card to spend more than they earn, having a big debt.

Installment Debt

Most people need help for buying a house or a new car. The money borrowed to purchase large-ticket items is called installment debt: The debtor pays a portion of the total at regular intervals over a specified period of time. At the end of that time period, the loan with interest is paid off. Installment debt is paid in a predetermined date, and it allow us to buy large items.

Revolving Credit

This credit is available to you at any time. Examples of revolving credit are credit cards like Visa, Mastercard, etc. While revolving credit is easy and is at your hand it could become an endless credit, where you pay only the minimun to cover the interest rate. The problem here is that you can spend more than you earn and you can get caught in a big debt.

Using Credit Wisely

To use credit intelligently, start by examining the terms of the card(s) you are currently using. Keeping track of your cards, their rates, and your current balances will help you to be aware of how you use credit cards. Try not to spend more than you earn, and pay all thay you consume at the end of the month.

Summary

• Remove high-interest-rate credit cards from your wallet or purse to reduce the temptation to use them unnecessarily.



• Read the fine print on all account statements to understand how your fees and payment amounts are calculated.



• Prepare to transfer balances from accounts with temporary low interest rates that are scheduled to rise soon.



• Use the savings from your debt reduction initiatives to set more money aside for important short- and long-term financial goals.