If you’re like most people, credit cards are a part of life. Whether it’s the department store down the street or online shopping for clothes and other items, chances are that someone you know has at least one credit card. Unfortunately, while they can be incredibly useful tools when used properly, far too many people end up falling into the trap of debt that comes with owning one.
The good news is there are steps you can take to avoid this problem before it occurs. If you follow these 11 tips below, you won’t have any trouble avoiding costly mistakes when using your cards:
• Keep track of every purchase made on each card. This may seem simple enough but make sure to record everything from major purchases down to car washes and coffee you get at the local shop.
• Only charge what you can afford. Nothing is worse than buying something only to realize later that you can’t pay for it. Before charging any amount, sit down and think about whether or not you can afford it in this current month. If not, your purchase might be put on hold until another time in which you’re in a better position financially.
• Be aware of outstanding debts. Having too much credit card debt may cost more than the actual items purchased by the card itself. Some cards offer an interest rate as high as 30% or even higher because of outstanding balances. It’s best to avoid allowing such rates from affecting your cash flow each month by making an effort to pay off outstanding balances as soon as possible.
• Don’t always take the store card. Even if you’re a loyal customer, sometimes it’s simply not worth signing up for a credit card offered to you by a specific store or bank. It may be an offer that seems too good to pass up but in the end, might cost you big time. Always compare cards and make sure each one is offering a rate and benefits package that works for your current financial situation.
• Keep track of all transactions. This one should go without saying but making sure to keep an eye on what every purchase is being put towards will help you from accumulating more debt than necessary.
• Do your research before applying for new cards. Even though getting approved for a new credit card may seem like the best thing since sliced bread, it’s important to realize that each company has its own unique spending requirements. Some companies won’t approve you unless you spend at least $2,000 on your initial purchase while others will give you approval by only making $1,000 worth of purchases within your first three months of membership.
• Don’t max out cards. Nobody wants high-interest rates but that’s exactly what could happen if you allow outstanding balances to completely eat away at available credit limits. Instead of allowing this to occur, make sure to never directly spend more than 30% on any given card just to be safe. That way, if something unexpected happens and extra cash is needed fast, there will be a safety net to keep you from going into further debt.
• Don’t close credit cards if they’re not currently being used. Having an extra card on hand might prove useful should you need to make a purchase that’s outside of your usual monthly budget. It doesn’t matter if the card is for personal use or business, having it open and active will help you from missing out on potential rewards opportunities.
Stay within spending limits while paying off debts against available credit. – Keeping track of your current balance is necessary in order to know how much money is available at any time during the month. Once this has been determined, do whatever you can to stay under those limits instead of going over into the negative.
o Contact your issuer as soon as possible if a purchase is going to put you over your limit . Allowing purchases to go through without verifying available credit will result in overage charges that can sometimes be very costly. If this happens, try to cut back on future spending until the upcoming statement arrives and balances are finalized for that particular month.
o Don’t allow outstanding balances to pile up on one card. Doing so only makes it harder to pay off debts since interest rates just keep getting higher with each passing month. Instead of allowing this scenario from taking place, make an effort to pay off something every time a statement comes around so at least some sort of progress is made throughout this entire process.
o Utilize automatic withdrawal. Whenever possible, set up an automatic withdrawal on your checking account that’s directly linked to the credit card company of your choice. This will help you from having to worry about missing a payment and getting slapped with late fees since all of this will be taken care of automatically.
• Keep cards separate. By having separate cards for different types of purchases (i.e business vs personal), it’s easier for any given company to track which ones are being used frequently and how much is spent in each respective category.
• Be careful when transferring balances. Some people choose to transfer balances between multiple cards so they can utilize low introductory rates on offer transfers but such action could cost more money in the long run. Basically, it’s important to not get ahead of yourself when doing this since the same rate probably won’t be available once balances are finalized for that particular month thus creating some sort of balance owed on top of whatever was already spent.
• Don’t spend more than 30% of your credit limit. Since most interest rates double if maximum limits are exceeded, you might end up paying some exorbitant amount in order to pay off debts accrued from spending too much money in any given month. Instead, just make sure that all charges fall under an amount that won’t surpass available credit by a longshot and everything should work out just fine.
By following the eleven tips listed above, you’ll never have to worry about not having enough money for unexpected expenses. Not only that, but it also becomes possible to get ahead of the game by learning how to effectively manage debts without any sort of nasty surprises caused by interest rates doubling up all at once.
The content provided in this article was chosen because it provides actionable advice on something everyone struggling with credit card debt should know before signing up for yet another credit card offer. By following the advice mentioned above, anyone will be able to cut down monthly interest rates and improve their chances of getting out of debt faster than normal.