Credit cards have made it very easy to handle unexpected expenses or to make major purchases when you want to or need to. They can also help you to avoid having to carry cash, but it can be surprisingly easy to get in over your head when it comes to using credit cards. Before you get in over your head, it’s important to think about how to avoid credit card debt.
Only Use Credit Cards When Needed
Money that you spend using a credit card is money you haven’t earned yet. Whenever you charge something, do your best to pay it off by the end of the month, or as soon as you can. It’s tempting to buy things you can’t really afford, but it’s better to save the money for things you want ahead of time.
If you’re carrying an outstanding balance, avoid charging anything else until it’s paid off. Credit card debt can delay financial goals and cost you hundreds or thousands of dollars in interest charges. Know what your balance represents, and try not to use credit cards to buy food or go to restaurants. These items are gone long before you’ve been able to pay the debt.
Understand the Terms of Your Credit Card
Whenever you open a credit card account, make sure you know what you’re agreeing to. Some credit cards offer several months at 0% interest, but after that time, the rate goes up, and it may go up significantly. Make sure you know the interest rate you’re paying, whether there are any fees associated with using the card, and what circumstances could cause your rate to go up.
Don’t take cash advances unless you’re facing a dire emergency. The amount of interest charged on a cash advance is usually higher than that on a purchase, and interest begins to accumulate as soon as you take it.
Recognize Signs of Overspending
If you don’t know what your credit card balance represents, your spending is getting out of control. When you can’t pay what you’ve borrowed back by the end of the month, it’s time to start curbing your spending. If you do carry a balance, don’t use more than 30 percent of your available credit.
Avoid opening too many credit card accounts. The more cards you have, the more likely that you’ll get into trouble. You may even forget to pay one or more of the bills and missed payments can damage your credit for seven years.
Protect Your Credit
A good credit score is important for reaching financial goals. If you are careful to always make your payments on time and avoid accumulating credit card debt, you’ll be well on the way to having a good score. Check your credit report to make sure everything on it is accurate. Lenders sometimes make mistakes such as misapplying payments which could make it appear that you’re past due when you’re not.
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