How To Avoid Building Your Credit Card Debt

Knowing how to use a credit card properly can be the difference between leading a comfortable life or a super stressful life. If handled right, a credit card can help build a better credit score, simplify purchases, and come in handy during an emergency. Mishandling a credit card, on the other hand, can result in substantial financial challenges that could be crippling. 

For you to avoid building your credit card debt, here are a few steps you can follow: 

1.  Stick to a Budget

Not having a budget is the equivalent of running up and down a field and not scoring a goal. Most people underestimate their monthly expenditure, but having a budget makes it easier to tackle this problem and save more. A budget also helps you to stay disciplined about your financial goals

What’s more important is, having a budget could help curb impulsive purchase decisions that could rack up a massive credit card debt. When you have a clear picture of where you financially stand and what you can afford, it makes it simpler to manage financial commitments and control impulsive decisions. 

If you are struggling with managing your credit card debt and budgeting seems complicated, you could check out to have more clarity to manage your credit card debt. 

2. Emergency Savings

When faced with an emergency, such as a medical expense or a car repair bill, most people would find themselves reaching out for their credit cards to deal with the issue. 

Instead of relying on a credit card for such situations, it is preferable to set up emergency savings in advance. Although it takes a lot of time to have savings that are large enough to cover 6 months of living expenditure, it is best to start with a small amount and continue adding it to the savings fund.  

3. Charge Only If It’s Affordable 

A credit card must never be used to pay for an unaffordable lifestyle. A lot of times, when people see items or services they want to purchase but can’t afford, they find themselves swiping their credit card. They may rationalize thinking that the credit could be paid back comfortably over time. But there is no guarantee of what financial situations could pop-up in the future. 

Instead of swiping the credit card for such purchases, it is better and safer to save up for these things and purchase only things you can afford to repay. 

A simple guideline to keep in mind would be to pay off the entire balance every month. If you are unable to do that, it means you are overspending. 

4. Always Pay On Time

One of the most vital tips for avoiding credit card debt is paying off the entire outstanding balance every month. When a payment is missed, the amount due for the next month will be much higher since you would have to make two payments. Additionally, you would have to pay the late fee, too. 

All this expenditure can make it difficult to fully pay the outstanding balance, and it can push you to use your credit card often just to get by, trapping you in a vicious cycle of credit card debt.

If you are unable to pay off the entire balance or most of the balance every month and are only able to make the minimum payment, it means you are overspending. In this scenario, usage of the credit card needs to be stopped until the entire balance is paid off. 

Late payments also tarnish your credit score, and late payments on multiple credit cards can result in huge interest payments. 

5. Avoid Multiple Credit Cards

The usage of too many credit cards can lead you to greater debt. When you have thousands of dollars available in credit, it can be tempting to indulge yourself and spend excessively. 

A lesser number of credit cards help avoid credit card debt and make it simpler to track your purchases and handle the bills. If you are using one card to pay the outstanding balance of another, it could prove to be very problematic for your finances.   

Bottom Line

If used effectively and with discipline, a credit card can help you manage your finances exceptionally well. In the process, you would also end up establishing an excellent credit score, which could help you to apply for bigger loans when you direly need it. 

Sticking to simple guidelines and being financially disciplined can help you avoid amassing a credit card debt and allow you to have a good credit score.