How to Avoid Credit Card Pitfalls

Credit cards seem to be as American as apple pie these days. Although credit card company advertisements would like you to believe that people use credit responsibly, sometimes, that just isn't the truth. Far too many people are living with credit card debt, paying only the interest or minimum payments on their balances and even damaging their credit in the process if they borrow more they can afford to pay back.

Although credit cards are sometimes necessary for renting cars, travelling and other activities, this doesn't mean that you need to let credit cards rule your life. Here are five simple ways to avoid the common pitfalls that people experience with credit cards, and how to get out of those pitfalls if you've already fallen in.

1. The first problem people have with credit card debt is not keeping track of how much they owe. This happens when you start opening credit card after credit card. Although you may owe only $300 here and $800 there, it adds up. Limit yourself to two to three cards. If you have more, you need to stop opening credit accounts.

2. The second common trap for credit card holders is paying just the minimum balance due. Credit cards are designed in such a way that paying only the minimum payment will keep you in a cycle of debt for years to come. You can end up paying three to four times more than you borrowed to begin with. As a rule, pay at least twice the minimum balance due (or more if you can afford it). This will help you pay off the actual balance instead of simply paying off the interest that has accumulated on your account.

3. Do you file away those credit card statements each month and never take a close look? You need to start paying attention, particularly to your APR. The APR is the annual percentage rate at which interest is charged on your account. If you make a late payment or go over the limit on your credit card you may have experienced an increase in APR in the past year. If this was a one-time occurrence, you can normally negotiate to have your APR lowered at a later date. Twice a year, contact your credit card company and speak to someone to see if you qualify for a lower rate.

4. Managing credit card debt is simple if you stop charging on your cards. That means you'll need to change your lifestyle, and if you can't afford something, don't buy it. This may be harder for some than it is for others but it's a necessary step in managing credit card debt and taking control of your credit score.

5. Be careful of interest free offers. If your credit card is relatively new and you have an interest free period, you can take advantage of this by paying off your balance during this period of time. A lot of people are enticed by the promise of no interest for six months but they don't take advantage of it the way that they should. Make a deal with yourself to keep track of your spending on this card and pay it off before the time is up.

Credit cards can be useful in certain situations but they shouldn't rule your life. If you need to take control of your credit or if you're new to using credit cards keep these suggestions in mind to help you manage your debt. Your credit score will thank you.