How to Avoid Credit Card Debt
A credit card is a loan. You must repay what you charge, plus interest. As long as you pay the balance every billing cycle, using a credit card is a nice convenience.
Follow these seven tips to avoid racking up credit card debt:
1. Pay it off fast. That means making more than minimum p
ayments. If you only make a payment every month, your balance keeps growing.
2. Open mail from your credit card company. It might look like junk mail, but it’s probably notifying you of a rate increase or a problem. Don’t ignore bills if you’re behind on payments either. That ruins your credit score. Your best tactic is to call the company and work it out.
3. Don’t fall for “rewards.” Many cards give points or rewards for every dollar charged. Think twice, since it’s often not worth the trouble or expense. You probably have to spend thousands to earn that airfare discount.
4. Don’t charge small items or daily needs. Instead, use your debit card or checking account for groceries, cell phone bills, lattes, movie tickets and other expenses that should be in your monthly budget.
5. Skip cash advances. You might get cash advance checks in your monthly statements. Shred them! The interest charges begin immediately and there’s a fee for using the cash. Plus, you will likely pay a higher interest rate, often with no grace period.
6. Don’t charge bills you can’t pay. If you have a bill that overwhelms you (medical expense, college tuition, another credit card), don’t put it on a credit card. Instead, call the company and negotiate a payment plan and/or lower interest rate. This keeps your interest charges from skyrocketing and pushing you further in debt.
7. Dispute incorrect charges. Be sure to review each monthly credit card bill to make sure you made the charges. If not, call the credit card company within 60 days of the charges.