Excessive use of credit cards can lead to many financial problems if you are unable to pay your credit card bill in full and on time. If you’re worried that you’ll end up getting too much credit card debt, you might be tempted to close your existing credit card accounts.
Unfortunately, if you close your accounts, your credit score could take a hit. Removing an account from your credit report could damage your score by shortening the average age of your credit report. It could also affect your credit utilization rate, which is the ratio of the credit you used to the total amount available. Over time, you could also lose the positive payment record on your credit report.
Since a lower credit utilization rate, a long account history, and a solid history of on-time payments are all essential to achieving a good credit score, you don’t want to close credit card accounts unless to be absolutely obliged to do so. The good news is that there are a few smart ways to cut credit card spending without closing the card completely. Here are three options.
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1. Withdraw your credit cards from online accounts
For many people, it’s easy to spend too much money online because it only takes a few clicks to place an order. Deleting your cards stored in online accounts could make it much harder to make reckless purchases on the computer without thinking about the consequences.
If you have to go get your card and manually enter the number every time you checkout with an online purchase, this will give you time to stop and think about whether you really want to continue purchasing the items. That alone could be enough to significantly reduce your spending, so that you end up using your cards less.
2. Freeze your credit cards
If entering your card information manually isn’t enough to keep you from overspending, freezing your cards in a block of ice may be a good solution. If you freeze the cards, you will have to wait for them to thaw before you can use them. This, like removing cards from online accounts, creates an additional barrier to spending and gives you time to consider whether purchasing is the right choice for you.
3. Keep an expense journal
Finally, keeping a journal of what you buy and how much you spend could also result in less use of your credit cards.
Tracking your spending allows you to be more aware of every purchase you make since you know you’ll need to write it down. Like the other two steps on this list, forcing yourself to take more time and make a more thoughtful spending choice may be enough to reduce how often you use your cards. You will also be able to come back to your list and identify trends where and when you are overspending.
Hopefully each of these three steps can get you to use your cards wisely for the things you really need so you can earn rewards – and reduce the kind of problematic spending that could end up causing you financial trouble in the long run. term.