How to Avoid Credit Card Debt
It’s so easy, sliding out that piece of plastic to pay for … whatever. The fact, though, is that overuse of your credit cards is a sure way to get in financial trouble. That’s especially true now, when interest rates are up, and credit is more expensive. Carrying excessive credit card debt can also waylay financial objectives, and maybe hurt your credit score.
Still, there ways you can avoid credit card debt, especially if you institute them early. Here they are.
Beef Up Your Emergency Savings
If you have an expense and little to no savings, you have little choice except to put it on a credit card. The problem is that the next thing you know, you’re covering those charges with an ever-larger chunk of your next paycheck, and that leads nowhere good. Or, you’re forced to make minimum payments, and all that interest will ultimately be your undoing.
Life happens. At some point you’re going to have a car repair, a large vet bill, or something else unexpected to deal with. If you have a safety net, you can avoid using credit cards. Start with a minimum emergency savings goal of $1,000, then work your way up to six months of living expenses.
Live Within Your Means
Excessive spending will get you in trouble every time. If that’s you, try to develop better habits before everything unravels. You may tell yourself that your $4 morning coffee is a small thing, but not over time. Besides, it’s risky to pledge future income.
Instead of putting things you want on plastic, save for them. Reserve credit card use for items you can afford to pay off right away.
Don’t Be Late
One top way to avoid credit card debt is to always pay on time. Otherwise, a missed payment means a hike in your next payment due because you must make two payments in addition to a late fee. This makes it harder to catch up and stay there.
If you’re already in over your head in credit card debt, we suggest turning to Achieve for debt resolution.
Don’t Toy with Balance Transfers
Consolidating your credit card debt by shifting high-interest balances to a 0-percent interest transfer card can be a smart, money-saving move. But repeatedly trying to game the system to skirt a payment due date can come back to bite you. Why? Because doing so can result in an ever-increasing balance once the transfer fee is added.
Pay it Off Monthly
Other than not using your plastic at all, the No. 1 way to avoid credit card debt is to pay your whole balance every month. This way, you needn’t worry about being able to make a minimum payment. This approach does require discipline since you can only charge what you can cover in a single month.
Recognize When You’re in Trouble
There are warning signs that will alert you that you’re falling into a debt trap. For example, if you can’t pay your total monthly balance, that’s a sign that you have charged too much. It’s also a sign that you must pull back on spending until you’ve cleared your balance so that you don’t make your situation worse.
Don’t Take Out Cash Advances
When things get tough, you might consider toting your card to a bank and getting a cash advance. Avoid doing this, since it’s expensive. You’ll have a transaction fee and higher interest rate, and there will be no way to avoid finance charges.
Do note that a cash advance is typically an early sign of looming out-of-control credit card debt. Make a budget, stick to it, and create an emergency fund.
Now that you know how to avoid credit card debt, you can become a proper, responsible steward of your plastic – and your financial health.
