Credit Card Debt: Avoid It Like The Plague

Whenever you get a credit card offer in the mail or in your inbox, you can be faced with a lot of temptation. The idea of a new, clean line of credit can be enticing, but it can also be your first step down the road to credit card debt.

These simple tips can help you manage the credit cards you already have and keep you from facing large amounts of debt.

Manage your Finances

The first step to avoiding credit card debt is to know how much money you have to work with. A good way to do this is to determine how much money you earn every month. This can be anything from paychecks to other forms of income such as money received through child support.

The next step is to determine how much your mandatory monthly expenses are. These should include rent, enough money for food, heating and electric bills, car payments and insurance if you have them. After listing how much you have to spend every month, add up all your nonessential living expenses, such as cable, internet or anything else you don’t need to survive.

Finally, combine your mandatory and inessential monthly expenses and subtract these from your monthly income. This remaining amount is how much disposable income you have every month. Keep this number in mind when making purchases with a credit card, because that is the maximum amount you will be able to pay your credit card company.

Set money aside

Out of the disposable income you have every month, it is recommended that you regularly set a certain amount aside. This can be in the form of 5-10% of your income dedicated to an emergency fund or placed into a savings account.

Find the right card

Every credit card is different, and it might not seem like fun, but it is necessary to read all of the fine print on any application before signing up. The fine print will give you a lot of essential information, including your credit limit. It is important to never charge more than 30-50% of your credit limit, as this will make your credit score go down.

The fine print will also tell you your interest rate, the things that will make that rate increase, and any other fees that might be associated with your card.

When looking for a card, you will ideally want one with little or no annual fees, a high credit limit and low interest rates.

When paying with credit

If you do decide to buy items with your credit card, try and treat it like cash. It is best to only buy things that you know you will be able to pay in full and on time before the next billing cycle starts. This will keep you from paying interest.

Also be sure to pay more than the minimum payment every month. Paying the bare minimum can reflect poorly upon your credit report.

Keep cards to a minimum

When dealing with credit cards, it is always good to have as few as possible. Keeping track of different credit limits, interest rates and monthly payments can be extremely difficult when dealing with several cards at once.