Credit card debt is a slippery slope that too many people have fallen down into. With high interest rates, it is fairly easy to get into debt and be stuck there. Fortunately, there are things to avoid in order to keep yourself debt free. The list below tackles the six things you can do to stay out of debt.
Don’t Charge What You Can’t Afford
If you cannot afford something, a credit card is not the answer. Purchases that you could not normally make with cash you have on hand should not be put onto a credit card. This is the first way people find themselves behind debt they cannot keep up with. As a rule, never make purchases that you won’t be able to cover by the end of the month.
Avoid Charging Food Purchases
Paying for food with a credit card is an irresponsible money management practice. Food, whether at the grocery store or going out, should always be paid with cash or debit. In general, you do not want to pay interest on disposable items.
Keep Up With Payments
Missing payments or paying late is detrimental to your credit score. Most credit cards also tack on a penalty for missed/late payments. Falling behind on month payments will only add to your debt and can make it much harder to get out of. Set up automatic payments to avoid more headaches from the credit card company.
Pay Balance at the End of the Month
The best thing you can do for yourself is pay off the balance before the end of the month. This will keep you debt free and living within your means. Credit cards are a great way to build credit and a sense of financial responsibility, but they need to be used wisely. Clearing your balance each month will relieve stress and keep you in good graces with the card companies.
Limit the Number of Cards You Have
Limit the number of credit cards you have open. The more cards you have, the more credit you have to spend. Avoid the temptation by keeping things under control. Applying for credit often also negatively affects your overall credit score. The more debt you have and the more cards you own poses you as risk to lenders. A lower credit score will make it difficult to receive loans and mortgages in the future.
Have an Emergency Fund
Some people have credit cards for emergencies. This is a bad idea because you can very quickly go into a large amount of debt this way. If you use your credit card to pay for car repairs or medical bills, these expenses rack up very quickly. Instead of using a credit card for emergencies, open a separate savings account and start building an emergency fund. This account will hold money that is only used for situations you deemed “emergency credit card worthy.” You’ll stay out of debt and have the funds on hand if an emergency arises.