Simple Tips to Avoid Credit Card Debts
Published on May 14th, 2015 | by Joan Makai
Accumulating credit card debts is easier than clearing them. The monthly statement mentions minimum payment amount, which seems easy enough to pay at the time. However, in the long run, high-interest rates slapped on the outstanding amounts each month can leave people with insurmountable debts. There are a few smart people who use credit cards optimally, and their lifestyle can prompt others also to flash their credit cards. But it is necessary to learn how to control using the credit limits within the credit card.
- Understand that it is your money that you are spending
Because the money does not leave the bank, credit card users tend to become complacent about this credit. Actually, they use credit cards like some gift or inheritance. The truth is people get access to funds for a short period beyond which interest is payable. This interest is cleverly mentioned by credit card companies in single digit, so it does not seem much. But the fine print says that interest on outstanding amounts will be compounded every month, and that can have a snowball effect. Therefore, the next time you feel the need to splurge, use a debit card, not a credit card.
- Know when to pull out the credit card
Credit cards are only for unexpected and unplanned expenditure, and not for regular meals. Therefore, do not use these cards for groceries, and daily expenses at all. Because the cash is available easily, the tendency to squander increases quickly. Reward points lure people to spend more than they need or can afford. As mentioned in Findlaw.com using credit cards sparingly is the best way to use this credit facility. Ideally, leave the cards at home when going for regular shopping such as shopping for clothes and groceries. If you do have the card with you, and you are tempted to purchase something, ask yourself a simple question – can I not do without it? The answer will help to keep everything real.
- Check future cash flows before you use credit card
Do not accumulate debt by paying only the minimum payment mentioned on monthly credit card bill. Do not use credit cards at all, if there are no receivables likely to arrive, by the time the credit card bill is due to arrive! This is a simple rule but is extremely useful to keep those deadly unmanageable debts at bay.
- Don’t carry credit cards while shopping with friends or relatives
Friends and relatives have their necessities and needs. Their shopping list is not necessarily ours. But there is a general tendency to spend on something unplanned for when people go out shopping together with others. A credit card makes it easier to pay and tendency to overspend at such times increases considerably. So avoid using credit cards while shopping with friends and relatives.
- Have limited number of credit cards
Credit card companies offer supplementary credit cards, and different credit card companies offer different limits. It is easy to apply for these cards, and usually, these credit card companies do not refuse. But that is almost like walking into spider’s web. If the family uses minimum number of credit cards, keeping track of expenditure becomes easier.
- Draw cash from credit card limits only during emergencies
What constitutes as emergency may differ from person to person. But being stranded in some place without any money represents one type of emergency. Medical emergencies are the other times when people can use their credit cards for withdrawing cash.
Financial discipline is necessary for everybody’s life. Credit cards challenge this discipline. It is not that the interest-free loan is not available on credit cards. It is. However, it is for a short period, i.e., from the date of purchase to the next bill. But people tend to believe that it will remain interest-free forever, which is hardly the case. Few steps can be adopted to prevent accumulation of credit card debts, and other measures can be accepted for clearing credit card debts. Both require will power.