Debt Management Mistakes To Avoid

Most people carry some debt, whether it’s a credit card balance or the money they owe on a car loan or home mortgage. Debt is not necessarily a bad thing, but it can become a problem if you allow it to get out of control.

The New Jersey Society of Certified Public Accountants (NJSCPA) offers these tips on mistakes to avoid in managing your balance:


Don’t Forget to Pay with Cash
If you have enough cash to pay for a purchase, try not to put the charge on your credit card. That’s an easy way to spend more than you intended — and in many cases spend more than you can really afford. Before you reach for that plastic, think about whether you’ve got the cash you need for the purchase. If you do, set the credit card aside for the bigger-ticket items.

Don’t Ignore Your Credit Report
Credit agencies maintain information on your credit history and give you a credit score based on whether you make your payments on time, accumulate heavy balances and other factors. Lenders use your credit score to decide whether you qualify for a new loan and what interest rate you should pay.

If the information in your credit report is incorrect, you could end up being denied a loan or paying unnecessarily high interest rates. You are eligible to receive a free credit report annually from each credit agency, so take advantage of this option and review the information carefully. If there are errors, inform the agency and ask how they can be corrected. Be aware that any suspicious entries in your report could be an indication of identity theft. That’s another good reason to keep an eye on your credit report.

Don’t Miss a Payment Deadline
Skipping a payment or mailing your check a little late may not seem like a big deal, but it can cause a big headache. Not only will you likely be stuck with a late fee, but your creditor may also raise your interest rate. When other creditors see the late or missed payment, they may deny you credit or raise the rates they charge you. This small step can become a costly mistake.

Don’t Stick to the Minimum Payment
If you’re squeezed for cash, it is better to pay a little rather than nothing at all, but try to pay off as many of your recent purchases whenever possible. If you pay as you go, you avoid interest charges on your purchases altogether. Even if you can’t cover your full balance, paying only the minimum due lengthens the amount of time you’ll have that outstanding balance—and the amount of interest you’ll be paying.

Don’t Leave Your Creditors in the Dark
Creditors understand that good customers sometimes fall on hard times, especially in the current troubled economy. And they’re often willing to work with you to prevent your account from falling into default, but you have to let them know that you’re facing problems. If you lose your job or face some unexpected financial hardship, contact all of your creditors immediately. Ask them if it’s possible to pay a lower interest rate or minimum payment for the time being, or if you can skip payments altogether for a few months until you’re back on your feet.

Consult Your CPA
Whatever financial issues you’re wrestling with, remember that your local CPA can help. Turn to him or her with all your questions about any financial issues facing your family. If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to, and in a few clicks you can locate a highly qualified professional who can assist you.

For more information on various personal financial matters, visit the NJSCPA’s public service website at While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.

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