6 Easy Ways to Avoid Credit Card Debt

Credit cards are a huge convenience but can also drag your down. A lot of personal finance experts are anti-credit card – and rightly so. When not used properly, you can end up in a lot of debt. With that said, having a credit card can be managed with responsibility. Here are some easy ways to avoid spiraling down into credit card debt.

1. Don’t Use It for Things You Cannot Afford

It can be really tempting to just swipe your card for a purchase and think about the payment later. This is what usually gets people into credit card debt. It’s not a good financial practice to compromise your future income with debt. If you can’t pay for a thing in cash, then most likely you can’t afford to pay it back.

A good practice is to plan your purchases well and save for that amount first in cash until you can really afford it. Then, you can use your card for that planned purchase to maximize the points and then pay it back in full.

2. Pay Your Full Balance and Not Just the Minimum Amount on Time

Probably the single most important rule of using a credit card is to pay the balance in full and on time. When viewing your credit card statement, go directly to the full balance amount, and skip viewing the minimum payment.

It can be really tempting sometimes to just pay the minimum required payment but remember that using your card has interest charges. The more balance you have, the more the interest charges you’ll get.

Credit card companies impose penalty charges when your balance is not paid on time. All of these fees can accumulate in your credit card balance without you noticing, and the next thing you know, you have 6 figures in debt.

Only use your credit card on things you know you can pay back in full and be mindful of when your credit card payment is due.

3. Have an Emergency Fund

Not all people that have credit card debt gained it through bad spending. Sometimes, the debt is caused by expensive emergencies like hospital bills and major house repairs.

Protect yourself from these unexpected expenses by building yourself an emergency fund rather than depending on your credit card to save you when you find yourself in a pinch. By doing this, you will be able to avoid credit card debt.

Personal finance experts recommend creating a saving fund worth 3-6-months of living expenses. It might take time to complete this but having even just a small amount of safety net can go a long way.

4. Have a Budget

Creating a budget is the most important thing you can do to be good with money in general. Plan your money and know where it should go. By creating a budget, you are less likely to use your card for impulse expenses that can spiral into credit card debt.

One of the benefits of creating a budget is it lets you see what you are spending your money on and makes you realize the things you can cut back on.

5. Avoid Using Cash Advances on Your Credit Card

When you are in a situation where money is tight, the easiest solution could be taking out cash advances in your credit card.

Keep in mind that a cash advance is the single most expensive transaction out there. It comes with a transaction fee, a high amount of interest rate for the cash you borrowed, and other finance charges. Avoid this by creating a budget and an emergency fund.

6. Limit the Number of Cards That You Have

There isn’t a single card that can address our financial goals thus, the tendency is to acquire more cards. A lot of sales people will tempt you about their shining new offers too.

However, bear in mind that the more credit cards you have, the more chances of falling into credit card debt.

A credit card is a good financial tool if used wisely. All of the tips mentioned above actually boil down to discipline. Practice having good financial habits and you will surely avoid credit card debt.