With the cost of living increasing seemingly daily, many Floridians use credit cards to pay for both everyday expenses and emergency ones. In fact, the average resident of the Sunshine State has a revolving credit card balance of roughly $6,460.
Revolving credit card debt may be problematic in a few different ways. For example, you may have to pay high interest rates on balances you do not pay off every month. Even worse, having excessive credit card debt may cause you to miss monthly payments. To better manage your finances, you should know about two credit utilization ratios.
Single card and overall credit utilization
Your credit utilization ratio is simply the amount of credit you have used relative to your credit limit. It is important to know both your utilization ratio for each card you have and for all the cards you have. The former tells you whether you are using too much credit on a per-card basis, while the latter gives you a realistic picture of your overall credit usage.
A mathematical formula
Calculating both your per-card and overall credit utilization ratio requires using a bit of math or plugging figures into an online calculator. If you prefer the first approach, simply divide your credit card balance by your credit line. Then, move the decimal two places to the left to turn the quotient into a percentage.
The magic number
Most financial advisors recommend having a per-card and overall credit utilization ratio of under 30%. If either ratio is higher than 30%, you may want to explore bankruptcy protection or another debt-management solution.