We live in a day and age in which most people use credit cards for at least some of their purchases. Not only are credit cards convenient, they can have other benefits such as helping you build credit when used properly.
But credit cards also pose a threat by allowing consumers to spend more money than they have and charging high interest rates. And as we reported in our last post, average credit card debt is expected to rise in the coming years, which could leave many Americans with balances they can’t afford to pay back.
In order to help avoid financial distress caused by credit card debt, consider these tips from FindLaw.com for keeping credit card debt under control:
Create a budget instead of relying on your credit limit. The credit card company has no idea what you can or can’t afford, and they make money by borrowing you more than you can pay back each month. That’s why you should create a budget to determine how much you can truly afford to charge.
Use your card for emergencies only. Credit cards are sometimes the only way to pay for emergencies such as a car accident, a surprise home expense or an unplanned medical procedure. Once this happens, create a plan to pay down the debt so that it doesn’t last month after month.
Limit the number of credit cards you have. It’s important to keep track of the purchases you make, the balance you owe and when the payment is due. If you have too many cards, this can be hard to do. Generally speaking, any more than two cards is too many.
Don’t make charges that you can’t afford. Credit cards let consumers to live beyond their means by allowing them to charge purchases they can’t pay for with cash or check. A good rule of thumb is not to charge something if you won’t be able to pay it off at the end of the month.
Avoid cash advances. Cash advances may sound appealing but they should be avoided because of their extremely high interest rates and transaction fees. Additionally, there is no grace period so even if the consumer pays back the advance amount by the end of the month interest is still owed.
As average credit card debt is expected to increase in coming years, keep these tips in mind to keep your finances on the right track.