How to Avoid Credit Card Debt
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If you own a credit card, there is a high risk that you could pile on so much debt that you may find difficult to repay. Defaulting on your loans mean that it would be difficult to borrow money to cover essential items in the future. Fortunately there are tips available that you can follow to help you manage and stay in control of your credit cards.
- Always have cash available to cater for emergencies
Often people build up credit card debt because they had to attend to emergencies such as sickness, loss of property etc. that there were ill-equipped for. As a result, they end up relying on a credit card to fund such unforeseen expenses. Try to establish an emergency fund that you can tap into in such situations. It could be in the form of a fixed interest savings account that you can only get access to after a certain period. Better still, you may want to sign up for an insurance policy that caters for different situation.
- Live within your means
The fact that it is a credit card, does not mean you have unlimited amounts of money to spend. There is always temptation to engage in unnecessary spending habits. You need to always treat credit cards as any other types of debts. Debts which you have to pay later, and with interest. Only use a credit card to pay for essential otherwise, stick to a cash budget as much as possible.
- Avoid carrying on balances to new credit cards
At some point in time you might decide to opt for another credit card, either because it offers better payment terms, has higher spending limit etc. It is important that you do not transfer outstanding balances from your previous card to the new one just for the sake of doing so. Try to establish if such a move may result in you paying lower interest overall or improve your credit worthiness. Nevertheless, it is always better to settle any old balances before taking on new debt.
- Be up-to-date to date with your payments
Whatever conditions that you might have signed up to with your broker, you need to honour them. This includes payments that you agreed to make to settle your outstanding balances. There is a temptation to forego payments when you are facing financial troubles. However, this would come back to haunt you through late payment fees which only drag you further into more debt. If possible try to settle your balance in full at the end of each month. This way you stay in control of your credit card debts.
- Detect signs of trouble earlier
You may never know how much you are in credit card debt until it is too late. Before things get worse, there are some signs that could give you clues such as:
- Using credits card to meet recurrent expenditures. Credit cards should be used as a last resort, but should you find yourself relying on them to pay bills or meet everyday expenses like food then you could be in trouble
- Ignoring or postponing payments. Should you find yourself constantly postponing when to pay your balances or do not feel like opening those monthly statements then those are not good signs
- Credit card debts keeps piling up and you have no plans on how you are going to pay. In such a situation, it is important to seek help and try to stop this dangerous cycle before it is too late.
- Do not take cash advances
The moment you find yourself having to use your credit card in order to take a cash advance that itself spells trouble. That is not to mention the tough terms that come along with such debts such as high interests and short repayment time. It is important you try to build up savings in order to avoid taking on cash advances to pay for unforeseen expenses.
- Never lend your credit card to someone else
Your credit card should be your own personal property as you are liable for all amounts incurred as a result of using. It is not a good idea to lend it to somebody else, even if that person promises that he is going pay the bill. An important question that you must ask yourself is why that person can’t get one of their own. If he/she cannot be trusted by the credit card company with one, why should you?.
- Read the fine print
Many times people fall into credit card debt because they did not pay enough attention to reading the small fine print before signing. Be aware of how the interest charges are done, when you need to make payments and related penalties etc.
- Avoid taking more credit cards
Do not take new credit cards unless you really need to. The more credit cards you have the greater the chances of slipping into debt. Only take a new credit card if it offers certain advantages that are to the benefit of your financial health.
- Set a budget and stick to it
Control spending with your credit cards by establishing an expenditure in budget. If you stick to it, you will avoid all sorts of unplanned expenditure you do not have any use for.
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