Avoiding Credit Card Debt

7 Tips On How To Avoid Credit Card Debt In Today's Credit Prone Society

Having a good credit rating while avoiding credit card debt is a very valuable thing in today's society. A bad credit rating can become a significant barrier to overcome when you have a legitimate need to borrow money, like when you are trying to buy a home.

It is very important that you take the time to examine your credit rating and avoid credit card debt.

You need to be able to use your good credit rating so that you will be able to live the life you wish to enjoy. Here are seven practical tips for avoiding credit card debt problems:

1. Forget About The Jones's

Beware of the need for status that may overcome your common sense. It's far too easy to give in to temptations of keeping up with the Jones's. Of course, it is nice to say you have that big screen HD TV with all the gadgets, but it also comes with a big price tag. Ask yourself if it is really a necessity, or if you can reasonably afford it? Is it worth the debt you may have to incur to get all of these technical marvels?

Have you considered how much interest you will have to pay by buying on credit? Have you calculated the bottom line which includes the initial price of the item plus the interest you will be paying? Can you honestly say that the item you are purchasing is worth that dollar amount?

If you add enough of these purchases you buy on credit, will you realistically be able to afford all the monthly payments as well as what you usually have to pay out in monthly living expenses, like mortgage payments, hydro bills, telephone expenses, and more?

Sometimes, avoiding credit card debt requires us to ask ourselves difficult questions. Don't you think it might be better to put aside (or budget) an affordable amount each month until you have enough money to pay for each item outright?

2. Maintain A Low Credit Card Limit

Many credit card companies send notices in the mail saying that you are eligible for an increase on the limit on your credit card. Using this option can be a BIG mistake. Consider that if you raise the limits on your credit cards, you are also increasing your temptation to buy more. When credit card companies notify you that they are automatically raising your credit card limit, you should call or write them and refuse the increase.

3. Avoid Co-signing Loans

When you are asked to co-sign for another person's loan, you should seriously consider what this may mean to your own credit rating. If you do co-sign for someone else's loan, it may have a major impact on your credit rating. If the other party defaults on the loan, you will be the one responsible for the loan's repayment, and if you cannot pay it reflects on your own credit rating.

4. Pay More Than The Minimum Payment

This is one of the most important tips for avoiding credit card debt:

When making payments on your credit cards, try to pay more than the minimum requested payment. The minimum payments are often low, and it is easy to be tempted to just pay the minimum amount. This, however, will increase the length of time for you to pay off the balance.

In effect, by only making minimum payments you will be paying off only the interest charged and nothing on the principal. Therefore, you will still be paying for the original item you bought probably even long after it has been discarded.

5. Know Your Credit Card Costs

Before you get any credit card, make sure you know what the card company charges for interest and what the annual fees may be. You may need to read the fine print to find out what they actually charge. Interest rates may vary widely with different credit card companies. If you feel you really need a credit card, do your homework and shop around for one that offers the lowest rate.

6. Save Your Credit Card For Emergencies

Be sure that if you have a credit card, to use it ONLY in emergencies. Stop impulsive spending by leaving your credit card at home when you go shopping. Avoiding credit card debt may require us to take tough measures at times.

7. Consider Debt Consolidation

If you find your overall payments and expenses become unmanageable, you would be wise to consider a debt consolidation loan. Consolidating all your payments into one amount can help you get back on track. Your bank or financial institution can do this for you. What happens is that the lender (your bank or financial institution) pays off all your existing creditors and combines the amounts into one manageable payment. This results in a lower monthly payment for you.

Summing Up

Be aware that your credit standing can affect the rest of your life. It can affect your ability to obtain a mortgage for that house you have been dreaming of, or in getting a car loan for that hot car you always wanted. Credit problems can also increase stress levels and affect your marriage. Money problems are a leading cause in many marriage breakups today.

Examine your own credit habits now and take steps to get your credit rating under control. Avoiding credit card debt now will save you countless problems later.

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