How to avoid high credit card debt
At times, credit cards can be your friend - they can get you out of a financial jam, raise your credit score, and rent you a car. But they can also turn in to your worst enemy. If not handled correctly, credit cards can lead to high credit card debt, astronomical interest rates, and monthly payments that can quickly overwhelm you. However, you can avoid high credit card debt by being getting in good habits now and being educated when it comes to credit cards.
Make a budget and stick to it
If you already have a realistic budget, it will be easier to avoid using your credit card as a crutch to get you out of financial jams. Many times, people will begin opening up cards and charging them up because they can't pay their monthly bills. Making a budget will help you to better control your spending so you don't have to rely on credit cards.
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Get a card that pays you
Many credit cards offer all kinds of incentives, from cash back awards to frequent flyer miles to gift certificates, for their use. This is particularly nice, as your card can reward you for using it. However, these can be a catch 22. Make sure you read the fine print before signing up for a card that offers little perks like this. Many times, they charge much higher APRs (annual percentage ratings, or interest rates) than a credit card that doesn't offer perks. So if you realistically will never cash in those frequent flyer miles or you don't think you'll use your card enough to collect any money from it, it's best to avoid them and get a card with a lower interest rate.
Limit the number of cards you have
It seems like there are credit cards for every store you go to now, whether it's a department store, a major credit company, or your favorite clothing store. While it may be tempting to open up these types of cards, the more cards you have, the more at risk you are for out of control spending and high credit card debt. Keep just one card for emergencies and credit score purposes.
Paying your credit card off each month pays
The easiest way to avoid high debt is to pay the balance of your credit card off each month. By paying it off in full, you not only avoid high interest charges, but you avoid relying on your card too much. If you find that you're unable to pay off the balance, put your card away and don't use it until it is paid off. Also, consider getting a card that requires you to pay off the balance each month, like American Express.
Use your card like cash
Think of your credit card like your debit card, and don't spend money that you don't have. Or make sure you only use your credit card in an emergency, and pay it off as quickly as you can. This way, you'll be able to pay the card's balance off each month and you'll be less likely to overcharge your card.
High credit card debt can lead to financial difficulty, even bankruptcy, for many people. But following the tips above and establishing good habits early on will help you to avoid high credit card debt and the stress and problems it causes.
