Shopping Resource: Avoiding Credit Card Debt
Avoiding credit card debt is not as hard as some people may think it is. Avoiding this kind of debt is certainly not impossible, but it takes some dedication and discipline. Keeping a good record on one’s credit card can even be likened to making sure that one stays healthy. Having good physical health starts with getting sleep, exercising, and eating right. Avoiding credit card debt largely relies on taking certain steps today to ensure a brighter tomorrow.
Keep the Right Perspective
Changes in the availability of credit cards, the advertising of credit cards, and the values of credit cards over the last 75 years have contributed a great deal to credit card debt. While in the 1960s not every consumer had access to a credit card, almost everyone has access to a credit card today. Increased marketing of credit cards has played a damaging role in the credit card debt that people encounter these days. To the end, this has inspired a whole culture of people who have a “keeping up with the Joneses” mentality that only worsens credit card debt. The thing consumers need to remember is they don’t have to be slaves to credit card companies.
Manage your Finances
Managing one’s finances begins with the initial step of analyzing the monthly expenses and income. About 5 to 10 percent of the income has to be put aside for any emergency reasons, short-term savings and also long-term savings. After setting up a budget in this fashion, the next step is exercising discipline so that one can stick to the budget faithfully. Finally, managing one’s finances also includes regulating how much one buys with his or her credit card in relation to one’s credit limit. The rule is to never, ever charge in excess of 30 to 50 percent of the available credit limit.
Shop for the Right Card
Shopping for the right card involves looking around for the card that suits one’s needs. In this financial sense, one’s needs means one’s particular, financial circumstance. It is ideal and advised for consumers to obtain a card that features low fees and low interest. People on the prowl for the right credit card ought to recall that it will take a certain period of time to do comparison shopping between different cards.
Read the Fine Print
Reading the fine print means going over the fine details of a credit card offer. While it may not seem inviting to spend hours going over the fine print, this will be of benefit to consumers. Reading the fine print empowers consumers to comprehend everything, like their fees, their interest rate, the manner in which rewards are earned, and how long a grace period lasts. Knowing all this will save time and money in the future.
Know your Interest Rate
Knowing the interest rate is key, even if one intends to pay off the credit card every month. Knowing the interest rate means knowing the interest rate that the issuer provides on approval of the credit card and also understanding the interest rate that was offered. Because emergencies like freak hospital bills and car trouble do occur, even people who refuse to carry a balance have to be familiar with the interest rate. If one is not up to date on knowing his or her interest rate, the outcome could be paying more than one would have to.
Pay the Balance in Full
Paying the balance in full is the sixth way that consumers can manage to stay out of credit card debt. There is one tip that consumers can practice to help them remember to pay their balance in full. Prior to making purchases, they should query themselves if they possess the actual funds to pay for the purchase. In a crisis where an emergency fund will not satisfy the total amount that needs to be charged, specialists advise consumers to still pay in excess of the minimum amount.
Pay on Time
Paying on time is one of the most important lessons consumers need to remember. The reason is that credit card companies—because of something called the universal default clause—can actually increase the interest rate on the credit card for any late payment. It is recommended to pay a little ahead of time to preempt any possible mail delay problems. Some people are increasingly turning to paying credit card bills online due to the possibility of mail delays.
Use it like Cash Not a Credit Card
Using the credit card like cash instead of a credit card means paying one’s balance fully every month. Knowing how much money you actually have available and not spending more than is easily paid off is the best way to use a credit card. The lesson here is to always stay on top of one’s credit card spending habits.
Limit the Plastic in your Wallet
It is recommended to only carry one or two credit cards in one’s wallet. The reason could not be any simpler. Each credit card features its own terms and conditions, its own penalties, its own due date, and other particulars. If one only carries one or two credit cards, then the burden of remembering when to pay each one drastically decreases, thereby reducing dangers of making late payments.
Avoid Extra Expenses
Avoiding extra expenses is the tenth reason to avoid any credit card debt. Before one knows it, the extra expenses have a tendency of sneaking up on a person before they even know it. This is because extra expenses usually occur in piecemeal fashion, one at a time. Extra expenses can be things like electronics, an extra dinner outside, or a small weekend trip somewhere.
Cash Advances
Cash advances are known to come with greater fees and interest rates and no grace period at all. Once one takes out a cash advance, one begins paying interest on said balance. This means that one still pays interest even if one pays the whole balance each month. Another reason to avoid cash advances is that credit card companies first apply any payments to any balances with the lowest interest rates.
Extra Products
Insurance and fraud protection are examples of extra products credit card companies will attempt to persuade one into purchasing. However, these extras are usually unnecessary. Even if one is defrauded, the most one can be liable for by law is only $50. Before buying these extra products, one should think twice.
Early Education
Early education is effective at preventing the younger generation from getting into credit card debt. One of the particularly vulnerable demographics is college students, since they usually enter college, get their first credit card, but have no financial education whatsoever. It is important to teach even younger kids than college kids about the problems of credit card debt. This is because advertisers are targeting increasingly younger kids.
To learn more about credit cards, hit these links:
