November 17, 2009
6 Ways Of Avoiding Credit Card Debt
Credit card debt is a serious problem and very many people fall into this trap. There are many reasons you should avoid credit card debt. One such reason is that credit card debt messes up your credit score. This means it is harder and more expensive for you to get car loans, mortgages, and other loans. However, there are several ways of avoiding credit card debt.
Shop for the right credit card
Different credit cards have different offers and since we all have different needs, you should go for the credit card that has what you want and not the one with the highest limit. When shopping for a credit card, you should compare the interest rates and other fees of different cards. There are many credit card companies and banks offering credit cards and it might be difficult to compare all of them, but you can browse websites such as CardRating.com for what you want. You should not have many credit cards at the same time – it is easier to fall into the trap of overspending with many credit cards.
Always read the fine print
The credit card industry is very competitive and for this reason, many credit card companies will indicate that they have low rates and low interest in their adverts. However, you will end up paying hidden charges once you start using their cards. They hide this information in the fine print of the contract and you should therefore read the fine print carefully before putting pen on paper. If the lingo is too technical for you, you should consider consulting your accountant for an interpretation.
Spend what you can afford
Credit cards have a high limit and this could be more than you can afford. You should therefore keep track of what you spend in a particular month and the moment you have spent what you can afford, you should use only use cash. You should have a budget and you should only spend what is in the budget. However, some people are easily tempted by credit cards. If you are such a person, you should consider using a debit card. This offers the same convenience and ease of use as a credit card, but at a lower risk of running into debt since you can only use what is in your account.
Always pay the balance in full
To avoid credit card debt, you should always pay the balance in full. If you let your credit card balance to accumulate, you may be unable to make payments and there is a risk of getting into debt or incurring huge penalties. Just as important as paying the balance in full is paying the balance in a timely manner. Credit cards have a universal default clause in their terms and conditions and your interest rates go up with late payment. You should consider online bill payment because the mail can arrive later than the due date.
Keep records
You should always keep your credit card receipts and you should reconcile them with your statement at the end of the month. You should go through the statement carefully to see whether there are charges that you do not recognize because credit card companies sometimes make mistakes.
Have an emergency fund
If you have an emergency fund, you will not be forced to use your credit card for more than you can afford in one month.