Best Tips to Avoid Credit Card Debt
You’re dying to have that new plasma TV. And the designer outfit you saw in the department store window. It’s SO tempting the whip out that credit card since there’s no way you can afford it right now – Right? Here are our tips to help you fight that urge – and help you save up to pay cash for the TV.
#1 – Establish a budget and stick to it. Meticulously track your expenditures each month and be sure to set money aside for savings (ideally 10%).
#2 – Don’t charge what you can’t afford. If you won’t be able to pay it off when your payment is due, DON’T BUY IT! It’s such a slippery slope once you get into a habit of buying what you cannot afford. You can become desensitized to overcharging and the debt piles up quickly. Almost every business today takes credit cards... because they know that you are likely to spend more money if you charge it.
#3 – Pay off credit card balances in full each month. Credit cards can be helpful in establishing credit, but make sure you pay the full balance each month to avoid high interest rates and late fees.
#4 – Be strategic about your credit card purchases. Pay for your living expenses, food, etc. with your cash, so that if you want something frivolous and cannot afford it, you aren’t as tempted to charge it. If you use your cash first to buy something frivolous and then don’t have enough money to pay your monthly expenses, it’s easier to psychologically justify using your credit cards to pay them, thus racking up more debt. Try your best to use credit cards for emergency purchases only. Never use one credit card to make a payment on another.
#5 – Leave your credit cards at home. The best way to avoid temptation? Alleviate it!
#6 – Limit the # of credit cards. This is hard to do when your mailbox is inundated with offers on a daily basis, but it’s critical to be debt-free. Too many cards can be cumbersome to keep up with, resulting in late payments and paying interest. Make sure that when you open up a new card to take advantage of a balance transfer offer, you close out the old card.
#7 - Read the fine print. 18 Months Interest-Free sounds great – make sure you are aware of when those 18 months are up, and the interest rates that will ensue.
If you follow these tips and set aside savings, over the course of several months you should be able to afford that new TV or outfit - and pay for them in cash!