Click for The Best Collection of Kindle Fire HDs Getting rid of your credit card does not guarantee that you will avoid debts. There are other means through which you can incur debts, for example, payday loans. Unknown to a number of people is that having a credit card helps in building their credit scores. When you use your credit card to make payments and settle the balance in good time, your credit score goes up. Therefore, getting rid of credit cards totally may not be a smart idea. Then again, this might not be the advice you are looking for if you are already in debts as a result of credit card. This article discusses in detail some of the things that you can do so as to avoid getting into credit card debts:
1: Create an Emergency Fund One of reasons why you may be having credit card debts is because you lacked adequate cash to take care of your automobile repairs, medical costs or any other expenses that may have arisen due to lack of cash. If you do not have cash at hand, the only option is to pay by credit. Hence, having an emergency fund will prevent you from spending using your credit card in case of an emergency. An emergency fund also work as a comfortable cushion when deal with debts. While you are paying off your debts, an emergency fund provide safety by having enough money to use for other purposes. This would prevent taking money from which kept for paying off your debts.
2: Pay Only for What You Can Afford
One of the common mistakes that credit card holders keep making year after year is paying for what they cannot afford. The only way through which you can avoid getting into credit card debts is buying what you can afford. If you are unable to acquire a merchandise with cash, then do not pay for it using a credit card. Understanding the differences between want and need would help to think well before making each payment using your credit cards in hand.
The following are ways through which you can avoid paying for items you cannot afford:
– Having Credit Card Limits: When taking out a credit card, make sure that you put a limit on it. In addition to enabling you to avoid paying for what you cannot afford, credit card limits also function in boosting your credit card score. A good rule of the thumb is to ensure that your credit card balance does not exceed 30%. Therefore, if you have a credit card with a $1,000.00 limit, you will not be able to charge for an item that costs over $300.00. Applying spending limit also helpful to shop wisely by knowing the limit and also manage situations like credit card lose.
– Having Discretionary Income: This is the amount of cash that you have left once you have deducted your expenses. Having more money as balance meant you have saved more money with wise actions. Such money can also be utilized later for better purposes like savings or investing etc..
3: Desist from Balance Transfers
Desist from the habit of balance transfers, just because you would like to have a balance transfer. You need to have a good reason for wanting to transfer the balance of one credit card to another. For instance, the new credit card should be able to provide you with low interest rate. One of the setbacks of opting for balance transfers is the ballooning of the final balance. Unless and otherwise you have better ideas on how balance transfers works, do not commit to such costly activity which may hurt you seriously.
4: Be Prompt on Making Your Payments
At the end of each month, make sure that you have cleared the balance on your credit card. The secret to avoiding credit card debt is not ditching the card, but making your payments on time. This is the only way through which you can guarantee that you do not have a balance carried forward.
While making payments, ensure:
– You have paid all the outstanding balances completely and no balance remaining. If not, remaining amount would add-up unnecessary interests.
– Always make sure to compare your bills with the transactions made and if found anything strange, inform the credit card company immediately to rectify the problem.
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