Your credit cards could be killing you. Seriously, a recent poll of 1000 adults revealed that the weight of their debt is causing stress-induced health problems that could easily lead to death. We know that credit card users don’t have a death wish, but with the average household credit card debt topping $9,000 and the average interest rate hovering around 20%, we wonder if credit cards should come with warning labels like tobacco: Credit cards can be hazardous to your health. This is an especially pointed warning to young doctors who are already buried in debt and who can’t afford to let their credit card debt get out of control.
How to Master your Credit Cards before it’s too Late
Stop Using Credit: What this really means is get yourself on a budget that enables you to pay all expenses with cash. Credit cards are often used to pay for non-essential and impulse buys, neither of which should be a part of your budget if you are already in debt. Additional budget cuts may be necessary to create your debt repayment plan. Smarter shopping, cheaper entertainment options, bagging lunches, etc, can free an extra $100 to $300 a month that can be applied to debt.
Make a Serious Credit Card Debt Repayment Plan: Set a target date, build a spreadsheet, and go to work paying off your debt. Focus your efforts on your highest interest cards first but always make more than the minimum payments on all of your cards.
Cut Up Your Cards: OK, not all of them, but at least the ones with the higher interest rates. The average household has nine credit cards most likely to satisfy their hunger for more credit. Cut your use down to the two lowest interest cards and keep paying off the others.
Consider Going Lower: Many people got into debt problems in the frenzy of transferring credit card debt from one card to the next great 0% offer card. Sometimes this can go on several times a year, and then they forget that the 0% offer expires in 6 months. If you’re still getting these offers, only consider them for transferring the balances from your highest interest cards – the ones you cut up.
Debt Consolidation Loan: While this may be a suitable option for some people, it really needs to be considered in light of a physician’s specific financial situation. It would tend to make sense to replace 19% debt with 5% debt from a home equity loan, but only if the debt repayment effort is maintained.
Debt can be harmful; if not to your health, it can seriously harm your chances of achieving your most important financial goals. The first warning to young doctors is when credit card debt begins to control your financial life that you know you’re in trouble. Don’t let it. Master your credit cards now.