Applying for a credit card is so easy and it’s really lovely to hold. It’s like an instant gratification because it feels like you have free money in a form of a plastic card. But that is a bad idea. Anyone who is a credit cardholder risks carrying a credit card.
If you have used your credit card too much on things that are not important, then you will start to feel the burden of credit card debt. Using it improperly will lead you to unexpected debt. So before you see yourself in this bad scenario, take a look at these tips to avoiding credit card debt:
Don’t buy things you can’t afford
You should totally avoid buying things you can’t afford. If you can’t buy it with cash, then it is most likely that you can’t afford to charge it. This is the battle between your NEEDS and WANTS. Prioritize your NEEDS over your WANTS. Only buy the things you can pay on time and within your monthly budget.
Always pay on time
If a cardholder pays the bill later than the due date, credit card company will charge late fees and it may raise the interest rate to the default rate that was written in in the fine print of the agreement. Keep in mind the default rate is usually twice the standard rate. If you want to seriously avoid credit card debt, you should stay track on your payment due. The amount you’re not able to pay on due date will carry over the next month, making two payments and late fee. It becomes difficult if you always pay late.
Don’t take any cash advance
If you’re going to take out a cash advance, expect that you will get a higher interest rate on its advance amount, transaction fees, and the most ridiculous thing is it doesn’t have a grace period. Without the grace period means that the interest rate starts on the day that you take the cash advance. It’s really bad because even if you have paid it in full at the end of the month, you are still required to pay the interest of the borrowed money.
Build a realistic budget
Now, if you’re currently experiencing credit card debt, you should prioritize which one to pay first. It’s time to create a budget for your repayment and also for monthly spending. With a solid budget, you can easily track your spending habit and be financially responsible for your credit card debt. You should stick with whatever budget you have created. It will help you to stay on track in terms of your finances. The budget also guides you in making a strategy for reducing your credit card debt and totally avoids getting cash loans just to pay it off.
Limit the number of your credit cards
As much as possible, you should only have one or two credit card maximum. Most of the time, you only need one card. In this way, you can easily track your purchases and ensure that you can pay them on time.
Avoid signing up for special services
Most of the time, credit card companies are bombarding the cardholder with so many ads of products affiliated with the credit card firm. It includes travel clubs, bag and shoe sales, fraud protection plan, insurance, and more. These products are usually overpriced or offer something that you don’t need.
Don’t make unnecessary balance transfers
You should avoid any unnecessary balance from one card to another so you can dodge the bullet of due sates. Transferring a balance to your other credit card should have a good reason like lower interest rate. Otherwise, you should avoid it so you won’t experience paying a little more because of the balance transfer fee.
Keep the receipts of your purchases
It’s essential that you have records of the things you bought especially when you used your credit card. It helps with errors and fraud with your card. If you have the receipts, you can compare easily your records with the statement, ensuring that you don’t have any unauthorized or mistaken charges. If you experience any fraud or errors, contact your credit card company and inform them immediately about the probably so you will be protected from liabilities.
Use with only durable goods
A good rule of thumb of using a credit card: use it for emergencies like a major car repair or even medical billing. When eating out or shopping for new clothes, it better uses cash or your debit card. If you have used your credit card for emergencies and you’re not able to pay it by the end of the payment period, you can include the repayment as expenses in your next budget cycle. The sooner you pay your credit card debt, the less interest you will receive from the credit card company.