The new year is already here, and many people are preparing so well. Among the many preparations that come with the new year is the decision not to carry debt into the coming year. While there are so many debts that people carry over, credit card debts seem to be one of the most recurring ones.
If you have credit card debt, you should aim at clearing it before the new year. Clearing your credit card debt helps show lenders that you are responsible, increasing your creditworthiness.
Benefits of Clearing Up Credit Card Debts Before the New Year
What are the benefits that come with clearing your credit card debts before the new year?
#1. Zero interests
One of the adverse effects of accumulated credit card debts on your finances is that it contributes to keeping you in a debt cycle. Credit card debts come with high-interest rates. The more you pile up this kind of debt, the higher the interest you will be expected to pay.
Therefore, clearing your credit card debt before the new year will help to ensure that you do not end up paying so much interest. You can go into the new year knowing that there is no interest waiting to be paid.
#2. Makes Debt Repayment Manageable
It can be tempting to make the minimum payment on your credit card, but it is not advisable. While this approach may seem to save you money for other things at the moment, it is not the best approach to use in the long run. It is, therefore, more economical to pay off your credit card balances as carrying it over will mean accumulating more interest.
#3. Credit Limit Extension
A zero credit card balance will always work to your advantage. It increases your creditworthiness and shows your creditor that you are financially responsible. If you plan to ask for a credit limit extension, one of the easiest ways to ensure that your application pulls through is by clearing your credit card balance.
#4. Reduction in Stress
Debt has been identified as a major cause of stress-related health issues, and clearing your credit card debt can help reduce your stress level. There is some measure of peace and confidence that comes from knowing that no outstanding credit card balances are waiting to be paid.
#5. Improves your Credit Score
Clearing your credit card balances has a positive impact on your credit score. With a higher credit score, you can get better loan terms if needed.
Wrapping up
Clearing your credit card balances had many benefits, and what better way to start the year than to go into it debt-free. However, if you must achieve this fit, you will need to have a plan in place that will help to ensure you meet your target.
