No one wants to be stuck in unending debts. It just happens without realizing it. Sometimes, it occurs out of your control, but the good thing is that it is possible to avoid debts.
Credit cards are useful in building healthy credit scores and handling those major purchases. Additionally, they come with other perks and rewards like cash back from purchases and airline miles. Despite their convenience, it is easy to get into debt quickly. Fortunately, there are several handy tips to avoid credit card debt. Check them out below!
- Create a Budget and Follow It
One easier way to limit the use of credit cards is to have a monthly budget. A budget helps in tracking the expenses and helps in ensuring you’re not spending more than you make. Similarly, you need to compare the expenses with your income to know the amount you can spend. With a budget, you will easily track the expenses on your credit cards and cut some unwanted items if possible. This way, you won’t easily get into a credit card debt trap. You can get through a month without having a debt on your card. Responsible habits toward your credit card bills will help you maintain a good credit score.
- Prioritize Your Needs
All needs are wants, but not all wants are needs. You don’t have to spend so much on buying unnecessary items. To know what is mostly needed and what is not, you should review all the expenses and then categorize them into essentials and non-essentials. The non-essential or luxury items are ones you can do without. Refrain from buying them if you want to avoid credit card debts. If you can’t do without them, you can look for cheaper alternatives. This will help in saving extra cash that could have been splurged on these unwanted items. Besides, it facilitates easier debt repayment.
- Make Timely Minimum Payments
Paying your bills on time is another way to prevent getting into debt trap. Ensure you meet the minimum payments every month. But this does not mean you’ll get rid of the credit card debt immediately. Paying your debt every month will save you the stress of having to deal with a huge debt. Besides, only a little amount of money can be added to your existing debt.
- Repay your Balance in Full
No one likes the idea of carrying a balance on their credit cards. When you carry balances, it means you’re paying interest rates on the purchases. Thus, you will end up paying more. If you pay balances in full, you will not get extra charges on your existing debt. This implies that the total amount you have to pay will be lower since there is no interest rate added.
- Know Your Credit Spending
One way to track your spending and not get into a debt trap is to know how much you are using on your credit card. You will easily know how much you have added to the balance which helps during the repayment.
Remember, your credit utilization shouldn’t be more than 30%. Since credit utilization also affects credit score, it is an important factor in your financial well-being. It can improve your credit score, so you try to keep your credit spending at a minimum.
- Know Credit Card Terms
Most people get into credit card debt because they do not take the time to read the terms and conditions of their cards. You must go through the terms to understand the APR, terms of repayments, terms of owning the card, interest rates, etc. This helpful information will help when you want to prevent getting into credit card debt.
- Reduce the Credit Cards you Use
The greater the credit cards you own, the greater the possibility of missed payments. Let’s say you have five credit cards; you’ll not remember the due dates of every card. There is a high chance of forgetting about the payment. Therefore, an important step to avoiding credit card debt is to limit the credit cards you have so as not to get into debt.
- Set Up an Emergency Fund
Believe it or not, getting out of any debt can be very challenging. But, if you have an emergency fund, it can help in case of an unplanned event. Since credit card balances come with high rates, you shouldn’t miss paying the balances. With an emergency fund, repaying your credit card bills will be much easier. Therefore, make sure you save some money in your savings account every month until it reaches the size where it can support you in case of a job loss.
Spending is one of the most common temptations people face today. You don’t know when you get yourself into credit card debt. However, you should avoid it before it happens. The above ways will help you avoid getting into credit card debt.