Do you really need that credit card in your wallet? People who own a credit card are literally and figuratively carrying too much risk. Owning just one credit card is enough to lead you into debt. Once you accumulated that debt, it can be hard to get out of it. If you already own a credit card or two, here are some tips from Roseland Associates to keep in mind to avoid credit card debt.
Set a Budget – And Stick to It
The first thing you should do is come up with a budget if you don’t have one in mind. Once you have a budget in mind, you should stick to it as much as possible. You may get tempted in the middle of the night to use your credit card for something that you don’t need when you have already spent what you’ve budgeted for that month. A budget can prevent these temptations from becoming action.
Charge What You Can Afford
Don’t use your credit card to purchase things you can’t afford. You can avoid getting into debt by only buying what you can afford. If you can’t afford to pay for the item in cash, then you shouldn’t use your credit card. While it’s okay to use your credit card for large purchases, only use it when there’s a dire need.
Keep an Emergency Fund
Not only should you have a budget, but you should also have an emergency fund for unplanned expenses. This fund should be used for sudden occurrences like car repair and medical bills. Most people turn to credit cards after these unexpected events because they don’t have a savings account. An emergency fund helps you avoid getting into debt by giving you the cash you need whenever an emergency arises. Life happens and the unexpected happens, so it’s best to stay prepared.
Carry Credit Card Balance
You should carry your credit card balance for no more than six months. If you carry it any longer, then you’ll risk being hit with higher fees and interest rates. The simple interest won’t be as simple to pay off. Your balance will be much higher than you anticipated. Think of your credit card balance as a snowball that will only get bigger and bigger as it goes down the hill. You don’t want your credit to go downhill with it.
Don’t Miss Credit Card Payments
Staying on top of your credit card payments is key to avoiding debt. Even if you miss only one payment, your next payment will be much higher than you anticipated. Not only will you have to make two payments, but you’ll also have to pay the late fee and any interest that was added.
Some credit card payments can be hard to keep up with, and it can make it hard to stick to your budget. You might even find yourself dipping into your emergency fund or savings account just to make the payment. You might even get tempted to use other credit cards in an effort to make ends meet, which only compounds the issue.
Pay Your Balance in Full
To avoid credit card debt before it happens, pay off your balance in full each month. You’ll never have to worry about carrying over a balance, and you can reduce your risk of slipping into debt. You won’t even have to worry about meeting the minimum payment each month since your balance has been paid in full.
Know the Signs of Credit Card Debt
Most consumers end up in credit card debt because they didn’t realize the warning signs. If you recognize these signs, you can avoid credit card debt altogether. Not paying your balance in full or not meeting your minimum monthly payments are just two signs that you’ll end up in debt. Other signs include having too many credit cards, spending more than you can afford, not sticking to your budget, and not being aware of your overall debt situation.
Avoid Using Cash Advances
Cash advances are not an ideal use of your credit card. If you intend on using your credit card as a quick and easy form of cash, you’ll end up in debt faster than you anticipated. Instead, you should just withdraw cash from your own bank account or borrow money from a trusted friend or family member. A cash advance is one of the biggest warning signs of credit card debt.
Focus on your budget and have an emergency fund so you don’t have to rely on a cash advance when the unexpected happens.
Roseland Associates stresses the importance of being responsible for all of your finances. If you ever get in over your head, your credit card company can work out a payment plan with you. However, this may also mean that you won’t be able to use that credit card again. When evaluating your options, keep in mind the debt consolidation plans available from Roseland Associates as this may end up saving a great deal of money.