Controlling Your Revolving Credit Lines

Revolving credit lines offer consumers the flexibility to choose when to use their credit and when to pay off their debt. Unlike installment loans, which require regular payments, revolving credit lines allow a user to make decisions about how much debt to carry month-to-month, if any. The problem with revolving credit, though, is that too many allow it to get out of control. The United States carries nearly $900B in revolving credit debt annually. To avoid getting into this situation, exercise good financial judgment when you use your credit.

Keep Only a Few Cards

Almost every store that opens its doors offers a credit card these days. Your wallet may be full of credit cards from your grocery store, department store and favorite discount warehouse. Do not fall into the trap of applying for cards for the 10% discount every chance you get. You should keep only a few cards open at any given time. Store cards do not often offer the best interest rates. Keeping just a few cards will allow you to have a more realistic picture of what you owe rather than having thousands of dollars spread out over multiple areas.

Set Reasonable Maximums

If you are offered a home equity line that takes advantage of 100% of the equity you have in your home, should you take it? It may not be the best idea. You need to set reasonable maximums on your spending to curtail any potential fallout. Credit card companies want you to spend. If you have good credit, you will likely be offered a very high maximum at this time. This doesn't mean you should use it or even accept it. By determining maximums you are comfortable with based on your detailed budget, you can prevent overspending.

Maintain a Low Balance

The most common-sense way to control your debt is to pay it off regularly. While carrying a balance is sometimes the only way to get through high spending periods, you should have definitive goals for when to pay it off. Financial advisors recommend carrying less than a 10% balance on a credit card to ensure you do not damage your credit. If you have to carry a higher balance, say around the holidays or when your kids go back to school in the fall, do so with caution. Commit to paying off the balance in its entirety at a definable date in the future.

Stop Spending When Your Balance is High

There is no better advice for controlling debt than controlling spending. If you are carrying a balance, you should stop spending. This may mean sacrificing luxuries like nights out for fancy dinners or shopping at organic food markets. Giving up luxuries can be hard. In the end, though, financial stability is the best way to assure a high quality of life.

Improve Your Credit Score - Free Consultation