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The Best Ways To Avoid Credit Card Debt

May 2, 2006 Write an essay on this topic.

The Bottom Line There are some steps to avoiding credit card debt that just about anyone can take, and it becomes up to each of us to follow them.

The easiest, but least used method, of avoiding credit card debt, is to simply not use credit cards in the first place. If you don't rack up the expenditures, you aren't going to have to worry about accruing any type of debt that you may need to deal with later. Unfortunately, with the way the world works right now, most of us have had to attain a credit card, and a large majority have had to put it to use quite a few times. So, let’s run with the assumption that people are going to use their credit cards then, and that the advice is geared towards people that are interested in using it in a fashion that avoids a growing debt. With many different credit cards out on the market, there are chances everywhere to get cards that will allow you credit lines at these different companies. There are the main ones (Visa, MasterCard) which have their own subsidiaries, and then there are the type that you can get through consumer related companies like gas stations or clothing stores. It's not that hard to get a card in the first place, but you want to make sure that you are at a decent annual percentage rate, that won't bankrupt you when you see the first payment being due. So, the first step is to only sign up for companies that are willing to offer you a low percentage rate. If it is unavoidable, then you are going to want to follow some of the important steps I am lining out here.

Avoiding the expensive purchases and not buying things that you don't really need on credit is an important step to getting on the right track. People will often charge things that aren't a necessity, because they don't have to pay any "real cash" up front. By using a credit card, it puts off the real debt, and you don't have to think through the purchase. When I am using one of my cards, I always keep in mind that I am going to have to pay for it sooner or later, and that I should assume there will be high interest if I wait too long. So, I double the purchase price in my mind, and ask myself again, if this is something worth purchasing at that cost. It is helpful, because it makes me think about how valuable the purchase will be for me, and it is actually worth paying interest to buy the product at that time. There are often instances where I will calculate this out in my head, and realize that I don't need the new toy just yet. If I put off the purchase for a short amount of time, I will be able to pay for it with a paycheck later on down the road, and I won't have to worry about putting too many charges on my credit cards. Self control can really play a big part in this decision making process, and over the years, I think I have developed more of an understanding of what products I need on the spot, and which ones can wait until I actually have money in the bank to pay for them.

When purchases are made on the card, another pit-fall shows itself, but it is sometimes overlooked by consumers. That consists of the 'minimum payment' which seems like such a great option, where you only have to pay off a very small part of your credit card balance. It seems really easy, but the problem is that when you only pay off a small part of it, say $10.00 or $15.00, it means that the remaining balance is going to have an even bigger interest charge the next time around. The interest works off of your totals, so once you have an interest charge, which is added to your overall balance for the next month, and can grow even larger, if you are only making a minimum payment. The companies want you to make a minimum payment for a while, because it means that they will be making more money off of you in the long run. This is why they extend credit in the first place, and they would like nothing better than for you to rack up a few extra dollars worth of charges that they can make a profit off of. This is why it becomes important to put money towards your credit expense each month, and to not think that just because the total balance hasn't come due yet, that it won't in the near future. You want the balance to not grow exponentially as time passes, so you should pay off whatever you can as soon as you can do it.

It is also important to realize that some credit cards give you a great low introductory rate, but really hit you hard with back-end percentages as high as 29.99%. You have to make sure you are also reading all of that fine-print that comes along with the agreement, because there could be hidden fees that you want to know about ahead of time. It is also important that you don't submit your payments late, because there are companies that will bump up your percentage rates if you don't come through with all of your payments on time. Being aware, and being conscientious about your payment schedule are just a few little things that could keep you from adding to a debt you may have already created. It is also a good starting point to avoid getting into debts that you won't be able to get out from under for quite some time. This is where scheduling out your bills on a spreadsheet or on paper for yourself can become important. If you write out when your bills are due, and what payments are necessary, it will be easier to stick to those payment schedules, and stay on track with all of your bills. If you have a better hold on where your money is going, you will be able to plan better when it comes to paying off things.

Though they may seem like easy ways to prepare and prevent yourself from a credit card debt, you must also be ready and willing to put them into action. If you have a credit card, you don't want to use it to reward yourself for a good day, or to fulfill a bad day by trying to cheer yourself up with a purchase. This is a road that can lead to unabated spending, and the debt can build up very quickly if you find yourself in a depressed mood for a number of days. It is also important to not think of credit as money in the bank, because it truly isn't. It is just a form of spending that will cost you more in the long run if you aren't careful with how you use it. When you go to charge something on your credit card, have a hard plan on how you are going to pay it off. Set a date for yourself, and know that you can't buy anything else in that time period that gets charged as well. You have to discipline yourself, and know that there are limits for a reason. Keep your credit card spending to amounts that you know you can pay off, don't go over-board with unnecessary purchases, and budget how you plan on paying back your charges. By doing all of these things you are setting yourself up to avoid substantial credit card debt.

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