The late teens and early ’20s are the times where many people are making transitions from dependency to independence. Regardless of that, you need to learn to balance rent, bills, groceries, and other expenses that can come quite a shock, and because of this, many young adults end up acquiring large debts that can plague them for years on end. Opening a credit card account can be a good start in building a good score, but it comes with the responsibility to use it wisely. Here are steps you can take to avoid unmanageable credit card debt.
Tips to avoid credit card debt
Never take out cash advances.
Cash advances have the highest fees and interest rates in every credit card transaction. If you don’t have the cash to withdraw from your bank account, you don’t have enough money to pay your credit card fees. Cash withdrawals from credit cards is the first time seen in people with credit card debt. If you find yourself using money that you don’t have in the bank, stop yourself before it gets worse. Cut up the card, pay the remaining balance, and close the account. Self-control is the first step to prevent credit card debt.
Don’t spend more than you can pay off.
It can be logical that with a steady income, you should be able to pay for a large purchase in a small segment. If your budget doesn’t have an extra $100-$150 to spend, then you don’t have enough to pay for the interest that comes with it. You will also never know what emergency expenses may arise. And if you can’t afford it without a credit card, then don’t buy it with a credit card. You should save up for more expensive items. This way, you know you can afford it, and you can save money by not spending extra on interest payments.
Pay off the full statement on time every month.
The sooner you pay your full monthly statement, the better. Timely payments prevent interest payments and will give you a better credit score. If you pay the minimum amount required, you will need to stop paying for interest. Most credit card companies charge around 15% to 18% interest, therefore, if your credit card statement says you owe $400 and your annual interest rate (APR) is 15%, instead of paying the full amount of $400, you only pay the minimum required payment of $35.
Use less than your full credit limit.
If you can’t pay your credit card right away, then make sure that you don’t use up your entire credit card limit. Cap off your credit card usage to an amount that is already in your budget. Using your credit card for entertainment or shopping sprees can add up fast, and before you know it, you have spent more than you can afford to pay off.
Don’t open more credit cards than you need.
The more cards you own, the more money you will end up spending and owning. Limit yourself and don’t open more accounts than you can handle. If you don’t have enough money to pay for one card, then you won’t have enough to pay for two or three. Having one credit card and timely payments is better than mismanaging too many cards.
Credit cards have many good benefits, like helping you have a credit score for buying a house or a car. But, if you go out of control, you may end up needing debt help from Doyle Salewski Inc. That’s why you should follow the steps above or click here to create a better financial future.
