You may think credit cards are easy to manage and that there is no possible way you could be the unlucky person to become tangled in debt. This is an unrealistic way of viewing the situation and this attitude toward credit must be stopped immediately.

This exact attitude towards credit is one of the most influential and underlying reasons that the average American now owes roughly $8,000 dollars to a single credit card company. Let’s crunch some of the numbers shall we?

Most credit cards use two main ways to pick your monthly payment. They either make you pay two percent of the total outstanding balance or, if that amount is under $10, make you pay $10.

“Two percent…that’s it?”

No, I wish it was that simple. Take an average credit card rate (18%) and divide it by 12. You get 1.5 thus; in essence, your average monthly payment of two percent goes towards 1.5% interest and 0.5% of the principal. Congratulations! At this pace it would take on average almost 54 years, and cost an additional $22,931.52 in interest when paying only the minimum 2 percent each month. I don’t know about you, but that amount of money could be spent on a ton of other better things that didn’t help you ruin your credit.

Referring back to earlier, I hear all too often of people treating their credit cards as additional income. You are correct, only if you want those thousands of dollars of debt. Credit cards are a means of saving you the hassle of always carrying cash, but should not be used in exchange for cash you do not have. However, if you are trying to achieve an excellent credit score, many credit companies will give you a slightly higher score if you maintain a small and manageable balance, after all credit card companies make their money off of interest.

I should mention briefly something that doesn’t come up very often. Budget. It isn’t hard to find someone referring to their budget in a context of, “Oh I can’t afford that, it’s not in my budget.” Many people don’t even know their budget and they try to guess what their spending power is when it matters the most. A simple breakdown of your paycheck on a piece of paper with a pen is all many people need to allocate funds for specific needs such as car payments, groceries, tuition, entertainment expenses etc. However, if you think you need more than this, there are online resources such as http://www.mvelopes.com that can help you squeeze out every useable dime from your salary.

Even if you can only afford to pay your minimum payment each month, at the least you are chipping away at the problem and not ignoring it for what it is. Debt is a serious problem, but it doesn’t have to be if you pay smart.