Episode Transcript
[00:00:00] Speaker A: It is Take Control Tuesday. I have Mansa Moussa on the phone with me. And Mansa, things are really tight for a lot of people, including yours truly. And right now, a lot of people have to turn to their credit cards in order to sustain. And today we're going to talk about what to do if you have a credit card balance at the end of each month.
[00:00:22] Speaker B: Yeah. You know, sometimes the economy just forces your hand. Prices go up, your income doesn't go up, and you got to do something to fill that gap.
So what happens to a lot of people is you end up carrying credit card balances. Now, first of all, let's say this. It's not a character issue. This is an economic situation.
[00:00:44] Speaker A: Sure.
[00:00:44] Speaker B: All right. So the question becomes, how do you handle it without letting it get out of the control? So the first thing you have to understand as we go through this period is if you have to carry balances, your goal is simple, to contain the damage.
You're not going to eliminate everything overnight. You don't have to be perfect. You just have to stay in control.
So step one, and this is for one or multiple credit cards.
You cannot pay something down if you're still adding to it.
[00:01:19] Speaker A: Right.
[00:01:20] Speaker B: So if possible, pause. Using the cards, give yourself a chance to get ahead. Now, that will require some decisions on your parts, but try to stop adding to the balance on the card.
The second thing you want to do is protect your payment history.
Missing payments makes things even harder. You get fees, you get higher interest rates. It damages your credit score.
So no matter what, stay current. That means making the minimum payment.
[00:01:52] Speaker A: Yeah.
[00:01:53] Speaker B: On your cards. That's your foundation.
Step three is pay more than the minimum if you can.
Minimum payments keep you in place. But even a small amount above that, just 10 or $20, starts to move things in the right direction.
Step four, if you have multiple cards with multiple balances, get focused. This is where people lose ground a lot of time. They try to do a little bit on everything, and nothing really seems to change.
So here's what I want people to do, and we've talked about this in the past.
Pick one card and focus on that. Choose one. The one with the highest interest rate, the one with the smallest balance. But that's where you want to focus.
To use this approach, you make the minimum payment on every card. Take the extra money that you have and apply it to that one card.
[00:02:53] Speaker A: Right.
[00:02:53] Speaker B: When that one card is gone, roll that payment into the next one. We talked about the snowball.
[00:03:00] Speaker A: Yeah.
[00:03:01] Speaker B: Avalanche. Effective debt reduction. That's what this is now one other thing with a credit card, whether you pick avalanche or snowball debt reduction, is to protect your credit utilization.
Remember, that's 30% of your credit score.
So if you have one card that's maxed out or close to it, focus on that one first to bring it down to a safer level. This protects your credit profile. Once you get it down to a respectable level, then you can go focusing on other cards.
Step 5 Pay attention to the direction of the balance. We talked about this last time when we talked about the new trending models in credit scores, right? You don't need the balances to drop fast, but you do need them to move down consistently month after month.
That's how you regain control.
STEP 6.
Use your money with intention. You know, after we cover our living expenses and make all the minimum payments that are due, what's left is what's called your disposable income.
That's your leverage. Don't spread it thin. Use it with a purpose. That means you have to be intentional with your money.
So you're going to feel pressure. You're going to feel like using the card again.
Try to find some other way. Only as a last resort if you have to, but stay steady. Try to stay on your plan.
[00:04:37] Speaker A: Absolutely. And again, it's not about a character flaw. It is about what's going on in the world right now. And Manta, we're going to put this information on take control Tuesday.com and as always, thank you so, so much.
[00:04:53] Speaker B: Thank you.
