Gail DonaldsonWith back to school right around the corner, many shoppers are hitting stores and using credit card to pay for their purchases.  A recent report by the U.S. Federal Reserve showed total consumer borrowing rose by 18.4 billion in May which is the strongest gain since November’s $25.1 billion increase.

While household income has increased in the past ten years, it has failed to keep up with the increased costs of living.  To compensate, many Americans rely on the most expensive ways to borrow—credit cards. 

The credit card trap is an easy way to sink further and further into debt.  If you cannot pay off the balance each month, don’t use them!  The average credit card interest rate can be 13% to 18% with a penalty interest rate up to 29.99% if the minimum payment is not paid.

Here are some tips to remember:

1. Pay off your balance every month to avoid paying interest on your credit card purchases.

2. Use the card for needs, not wants. A credit card should be used carefully. Wants can lead to frivolous purchases which will put you in over your head.

3. Never skip a payment. Pay your bill every month, even if the minimum payment is all you can afford. Missing a payment could result in a late fee, a higher interest rate and a negative mark on your credit score.

4. Stay under 30% of your total credit limit. One way to keep your credit score healthy is to keep your credit ratio under 30%. This credit ratio is the percentage of total available credit that you’re using. For example, if your credit card limit is $2,000 you should keep your balance under $600. But the ratio applies to the sum all of your cards, not just one card!

Before you fall into the credit card trap, please contact one of our Bond & Botes offices so an attorney can discuss your financial situation to see if we can help!

Gail Donaldson
Written by Gail Donaldson

Gail Hughes Donaldson is a Managing Partner of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She’s been helping families work through the bankruptcy process since she started with Bond & Botes back in 1993 as a paralegal. Read her full bio here.

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