Credit Card Tips

How to prevent yourself from falling into credit card debt

In order to prevent yourself from falling into credit card debts, there are many things that you can do.

Firstly, keep track of how much you spend using your credit card when you purchase and also be aware of how much money or savings do you actually have either in your bank account or with you before you decide on what you are going to purchase.

At the same time, when you have received a bill from your credit card company, it is always wise to pay off the amounts as stated as soon as possible to prevent having to pay interest if you pay off the debts much later.

Here are some more tips to prevent yourself from falling into credit card debt:

1. Get the Right Card.
It is very important to get a credit card personalized for your certain situation. Ideally, you should get one with very low fees and interest. Read the fine prints. Spending time reading the fine print probably doesn’t sound very attractive, but reading can save hundreds of dollars in the long run.

2. Know the warning signs and implications of getting into too much debt.
Many credit card debts can be avoided because there are warning signs that you are getting into too much debt. People do not usually fall into credit card debts overnight. It happens gradually.
Warning Signs:

• You are used to charging to your credit limit.
• Most of your monthly income and/or savings are used to pay your credit card debts.
• You borrow from your family and friends, or take cash advances to pay your credit card debts.
• You only have enough money to pay the minimum sum on your credit card bill every month.

 3. Implications:

• If you do not pay your debts punctually, this will be reflected in your credit history. This will affect future loan applications.
• Creditors can force you into bankruptcy if you accumulated debts of $10,000 or more. Bankruptcy will leave a negative mark on your credit history.

4. Settle your outstanding balance in full every month.

• You will not incur any interest charges if you pay the outstanding balance in your credit card in full every month.
• Usually, if you pay only the minimum sum stated in your monthly statement, you will incur interest charges amounting to around 2% monthly or 24% per annum of the outstanding balance.
• Interest will typically be charged on the outstanding balance from the statement date and any new amounts charged to your credit card.

5. Use your credit card sensibly.

• Use your card sensibly and make sure you pay off all credit card bills every month.
• Set a monthly budget for your credit card spending and keep track of your expenses.
• If having a credit card tempts you to overspend, do not apply for too many credit cards or use a debit card instead. With a debit card, you can only spend up to the amount you have in your account.
• By controlling your credit card spending, you can avoid falling into credit card debts.