Congratulations! Paying off debt is a huge accomplishment that should not be overlooked. It can feel shameful to have credit card debt and carry a monthly balance, and is not an easy feat. Now that the chapter of your life with debt is closed, it is time to move on to the next step and determine how soon you should begin using a credit card now that you have paid off your debt.
[Read: All about the Best Credit Cards]
Today it is the norm to use credit cards and it can seem difficult to live without one. While you may plan to abstain from using credit cards after paying off debt, many people simply do not feel prepared to make that commitment. I know that would be incredibly difficult for me personally, but it is not a decision that should be made lightly. Before making your final decision, consider the following points.
Take A Moment to Breathe
After paying off debt, you need to take a moment to assess your new debt-free way of life. Consider the following questions:
- What should I do with any extra money each month?
- What is the best way to make my money work for me?
- How can I keep myself financially accountable?
You may have already begun to ask yourself these questions. If you haven’t, now is the perfect time to start considering how to answer them and plan for your future. The most important thing to remember is that you have broken the cycle of debt for good and are ready to move on. Paying off debt isn’t easy, and now you need to plan so that you stay out of debt.
There is No Set Timeframe
It may be tempting to try to “keep up” with friends or neighbors when paying off debt. However, remember that there is no set timeframe in which you must begin using a credit card again after becoming debt-free. This all depends on you, your lifestyle, and your goals. Each person has a different situation in his or her debt payoff plan. There is no set timeframe when it comes to using a credit card after paying off debt. This will depend on your personal situation and the particulars related to your debt payoff plan. If you still have access to credit cards and have not been required to close your accounts, you need to take the time to decide what is best for you. It is crucial to consider whether or not using credit cards will tempt you to overspend. If this is the case, proceed with extreme caution before using credit cards again.
Start With A Plan
Just as you plan for a day at work or a weekend away, you need to have a plan after paying off debt. No matter when you begin using credit again, having a plan is essential for helping you stay out of debt. You may find it best to work this into your overall budget if that helps you visualize your goals. It is also important to instate a spending plan once you begin using credit cards again. This will help you develop discipline with spending and keep you accountable so that you do not overspend.
One way to do this is by allowing yourself one small, planned and budgeted purchase per month. Giving yourself a reasonable limit and sticking to it will help you develop that discipline. As you build confidence in your credit card usage, you can increase the number of small, planned purchases to an amount that brings you enjoyment without blowing your budget.
What works best for me is to have someone I trust (in this case, my husband) keep me accountable for my credit card usage. We document every purchase on a shared spreadsheet. This way, we each know how much the other has spent that month. Since we trust each other to keep the other accountable, we can challenge whether or not we have stayed on track that month.
Long Term Goals
It may feel tempting to cancel your credit card altogether after paying off debt. This is definitely understandable, but may negatively affect your credit score. Although it sounds contradictory, credit companies monitor your score based on how frequently you close lines of credit, so exercise caution here. Your best option may be to store your credit cards somewhere hidden yet safe so that you aren’t tempted to use them, yet don’t affect your credit score. This will ensure that your future isn’t impacted in terms of loan rates, potential jobs, and so forth.
What’s most important to remember is that you take your time when making decisions about your debt-free future. Make sure that you make a careful, balanced decision that will have a positive impact on your future.