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7 Ways to Avoid Runaway Credit Card Debt
Credit card debt is a huge problem, and once it reaches a certain level, it can really seem like it's taken on a life of its own. The truth is that once you get in too deep, it's very difficult to get out. The best strategy is to avoid accumulating excessive amounts of credit card debt in the first place. Just how to do this may seem like a mystery to some, but by observing a few simple rules of thumb, you can avoid this serious and all too common problem.
#1-Choose a lower limit
Some cards offer limits that are set as high as $50,000 or even $100,000. While these may be suitable for some business owners or those who are quite wealthy, they're often trouble for the average consumer. In the first place, obviously, a high limit makes it much easier to accumulate a substantial debt load. But, there is another dimension to these high limit cards as well. Let's say you have a card with a $2,500 limit. Once your balance is up to about $2,000 or so, some warning bells will start to go off. You're close to your limit. You need to stop spending and start paying some of it back. With a much higher limit, however, it's likely that your balance will be much higher before you start to worry. And certainly, nearing your limit on a $100,000 card is much more serious. Stick to a card with a lower limit to avoid excessive debt.
#2-Get online account access
Many credit card companies mail out statements to cardholders once a month. Because of the delay between when statements are sent out and when they are received, new charges will not be included on monthly statements. Therefore, it's very possible that many cardholders have no idea what their current balance on their card actually is, which can spell real trouble. To avoid debt, it's important that you closely monitor your balance and your spending. Getting online account access that will allow you to check in on your account at any time is a good way to do this.
#3-Pay your balance off each month
This is the single most effective strategy for avoiding excessive debt. Ideally, at the end of each month, your card should have a balance of zero. You'll not only avoid accumulating debt, but you'll also avoid interest charges, late fees, over the limit fees, and the multitude of other fees your credit card company might charge.
#4-Limit the number of cards you have in your wallet
When credit card issuers offer consumers free gifts, bonus points, and low introductory rates, it can be tempting to sign up. However, the more cards you have in your wallet, the more likely you are to get yourself into trouble. Partly this is because you simply have much more credit at your disposal. However, multiple credit cards also means it is much more difficult to track your spending and your debt. A credit card or two should be plenty for the average consumer.
#5-Avoid cash advances
With most credit cards, cash advances result in higher interest rate charges than other types of transactions. It's not uncommon for APRs to exceed 20%. Perhaps worse is that interest usually starts accumulating the very same day you took out that advance, so by the time your statement arrives you may have already been charged a huge amount of interest. Avoiding cash advances whenever possible is a good strategy for preventing excessive charges and debt.
#6-Pay off high rate debt first
For many people who realize that their debt is out of control, it's not so much what they actually owe that prevents them from paying off this debt; it's the high interest rates. Rates on credit cards can vary substantially, and higher rate cards will take far longer to pay off if you only make minimum payments. If you have two or more credit cards that you are trying to pay off, concentrate on the one(s) with the highest interest rates first. You'll prevent runaway interest charges that can quickly translate into runaway debt and, consequently, you'll pay off your balance much more quickly.
#7-Use credit as a temporary measure, not a lifestyle
Perhaps the only thing that will ultimately solve the widespread problem of credit card debt is a shift in the way we think about credit. How do you view credit cards? Are they an occasional measure you use to get you through until payday? Are you a business owner who wants to consolidate all your expenses onto one account? Or, is credit a way for you to obtain the things you really can't afford? For most people with out of control debt levels, it's the latter. To avoid excessive debt, try to change the way you think about those cards in your wallet. They're not "free money." Before you make any purchase, ask yourself whether you will have the money by the end of the month to pay for that purchase. If the answer is yes, it's ok to use your card. If the answer is no or an uncertain maybe, you simply can't afford it. Bottom line: don't spend money you don't have and/or most likely will not have by the time your monthly credit card statement arrives.
About the Author:
Paul Basco Provides Expert opinions and reviews to help you Compare and Apply for a Credit Card Offers online. At GettintingaCreditCard.com, we offer credit cards for bad credit, low apr credit cards, instant approval credit cards and much more.
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