You can easily purchase everything you want if you have a credit card available. While there are a few problems attached to owning credit cards, you can still use them to your benefit. While many financial planners would suggest not to own any credit cards, others would suggest you have them available for emergencies or to help build good credit.
Though there are some benefits of owning a credit card, many people end up with debt and adverse effects on their credit because they use them to live outside their means. Credit cards can be useful if the risks of building debt and harming your credit score are avoided. Here are nine ways to avoid credit card debt.
Build a Safety Net
A credit card may be your best option to save you from an emergency expense if you don’t have an emergency fund. Therefore, if you have an emergency fund, you can avoid charging the emergency expense to your credit card, which has interest. Using your credit card for an emergency and unbudgeted expense can cause hardship when attempting to pay the credit card bills and can lead to late payments and negative effects on your credit score.
Stick to What You Can Afford
If you have a credit card, it can be tempting to use it when you see items you want but can’t afford. Spending outside their means is the number one reason people get into debt in the United States. Having lines of credit like loans or a credit card can be great if you simply want to use it on the spot to make a purchase or pay a bill with the intention that you will pay it back immediately. However, if you continuously use your credit card to make purchases you can’t afford, this will lead to debt that can become insurmountable.
Avoid Unnecessary Balance Transfers
Transferring your total balance from a credit card with high interest to one with low interest is the right move to pay off your balance at a lower cost. However, if you transfer money to circumvent the credit card payments, this will grow your balance adding transfer fees. If you are unable to pay your credit card balances down within one to two billing cycles without transferring your balance, you are building debt that could overcome your financial health.
Always Pay Your Bill on Time
Staying on time with your regular credit card payments is one of the best ways to avoid credit card debt. Making your credit card payments on time should be a no-brainer, but using your card to live outside your means may be difficult. You have to have self-control and make payments on time and try to make them more than the minimum to reduce interest.
Pay Your Full Balance Each Month
Paying your credit card balance in its entirety each month is the best way to avoid credit card debt. Not only will paying the entire balance to avoid debt, but it will build your credit score. If you can’t pay your total balance each month, this is an indication that you are living outside your means. Keeping your spending and expenses under what you can afford should be a monthly budget priority to avoid debt. This control should especially be applied to credit cards due to the fact that they carry interest.
Know the Signs of Credit Card Debt
You should always be paying attention and able to recognize early warning signs of possible credit card debt. This recognition will ensure that you cut back on your other expenses to get it under control before it overwhelms you and your income. Be stingy when using your credit card and only use it if you need to or will be able to pay off the balance in full and immediately. You can check your credit card balance daily; you should always know your balances so that what you owe can be planned for, and payments can be made on time and in full.
Avoid Cash Advances on Your Credit Card
In a moment of need, you might consider taking out a cash advance on your credit card. This withdrawal should be totally avoided unless you have no other choice. Cash advances are very costly, with not only interest on the amount, but there are fees that can hike up the debt to an unmanageable amount. To help avoid taking out a cash advance, you should have an emergency fund. Though you will need to pay yourself back, the advantage is using those funds will carry no interest or fees.
Don’t Lend Out Your Credit Card
When it comes to your credit card, you are the only one responsible for the charges made to your credit card. Lending your credit card to another person puts control of your credit card and what is charged to it with someone else. For security purposes alone, you should never lend your credit card to anyone. If you are going to use your credit card to help out a friend or family member, you should consider using another form of payment to help them out. Keep your credit card in your possession to avoid overcharges or theft.
Limit Your Number of Credit Cards
It stands to reason that the more credit cards you have, the greater the opportunity to get into debt. There is no reason to have more than one credit card as even having one can put you in debt; you may not be able to overcome. If you can get better rates on a different credit card, you should cancel out the other card and put all of your focus on the credit card that gives you the best rate.
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