Avoiding credit card debt means managing what you can pay for, use your credit card only for what you can afford to pay off at the end of the month.
Don’t keep your balance higher than 30% of your allotted credit limit. This practice may help you avoid higher interest rates and late fees since the lender has a higher chance of collecting from you if you carry a higher balance.
If you are using your card for emergencies, be sure to build up an emergency savings account so that when the emergency comes up, you will have enough money to cover it and not need to rely on taking out further credit from your card.
A few other tips include not paying for things that you could otherwise purchase with cash and never paying the full monthly statement amount due.
Should you find yourself unable to pay the full amount due, avoid making only a partial payment. This will ruin your credit score and could even lead to interest rate increases on your card.
Instead, make at least the minimum payment, which should be a small percentage of your total balance due that month. Then move money out of savings into your checking account and pay more than the minimum due, in order to reduce the balance on your card as you go.
If you can afford it, make an extra payment that month. For example, if you have the money available to pay $3,000 for your credit card bill each month and you know you’re only going to charge $2,500 that month, simply write a check for $500 and mail it with your statement each month.
Do this every once in a while to help pay down your debt faster.
How Much Should I Be Avoiding Credit Card Debt?
You should also never use more than 50 percent of your available credit limit on any card at one time because you’ll be getting charged high-interest rates on a larger chunk of your available credit, making it more difficult to pay back. Avoiding credit card debt of more than 30% of your credit limit is advised.
If you can be successful in avoiding credit card debt entirely from time to time, it will help you save money as well as keep out of debt.
It’s also good to be aware that if you have multiple cards and/or are carrying a balance on one or many of the cards, you can save money from paying interest by transferring your debt to a card with a lower interest rate. You may also want to consider having just one large, unsecured loan and paying it off as quickly as possible instead of carrying multiple credit cards at a time.
Even though multiple credit cards can increase your ability to pay back debt, you’ll end up paying more interest fees if they are still carrying a balance.
For those who need to get out of credit card debt but don’t have a substantial source of income available in their budget, consider a debt consolidation loan that will allow you to pay off your credit cards with one bill at a time. This also gives you a lower interest rate, as opposed to your credit cards.
Major banks and other lenders offer debt consolidation loans with fixed interest rates in the low single digits. They also have extended repayment terms of five years or more, so you will be paying significantly less each month on these types of loans than you are currently paying in credit card minimum payments.