How to avoid credit card debt

Understanding Terms and Conditions

The first way to avoid getting into credit card debt is to understand what you are getting yourself into. When you open a credit card, read your credit card terms and conditions and understand them before you use your card. Look for any fees that may be associated with purchases you make or balances carried. Such fees may be interest fees, late fees or annual fees.

Interest fees are assessed and added to your balance at the end any months that you carry a balance. Interest is a small percentage of your remaining balance. Late fees are assessed and added to your balance for payment not received before the statement due date. If you make consistent payments every month and you are occasionally late on a payment many credit card companies will forgive or “waive” fees. If you just call your credit card’s customer service and explain why you where late on a payment, late fees or interest fees could be waived for you. However you should not count on this courtesy every time you are late on a payment. Some credit card companies do not offer fee waivers or have limits on waivers.

Spending as much as You can Afford

The key to not getting into credit card debt is to carry a small a balance on as few credit cards as possible. You should be aware of what you can afford and pay it off each month. Credit cards are needed for some purchases and can be a tool to improve credit. When you carry a balance on many cards you may get yourself into unnecessary debt and could hurt your credit. Keep one or two major credit cards and use them as a tool to manage monthly expenses if you are able to pay off the full balance each month. By doing this you will escape interest fees each month while maintaining a good credit history.

Avoiding too many store credit cards

Everyone has been offered a store credit card when checking out at a retail store to receive a discount. You should try and avoid opening too many store credit cards known as private label credit cards. Even if you are offered a great discount to open a private label credit card at time of purchase you should resist too many store credit cards because of the temptation to carry a balance that is easily forgotten. Use one major credit card to make purchases at department stores and every day credit card transaction instead of private label cards. You will then receive one statement each month and it is easy to review all of you purchases and pay them off at the same time without carrying a balance. You will prevent credit card debt if you limit the amount of cards used and statements received because you will not forget about outstanding balances.

Using Cash Advanse as a Last Resort

Using a credit card can be convenient when you do not have cash readily available. This does not mean you should use a credit card to get cash back. You should only use a cash advance in small amounts and as a last resort. Whenever you withdraw a cash advance on your credit card they come with high fees and high interest rates. If you receive checks from your credit card company to pay off other expenses and bills understand they are often processed as cash advances and cash advance fees will be assessed. Constantly using you credit card to withdraw cash advances you will certainly find yourself getting into credit card debt quickly.

How to Get out of Debt

If you do get into credit card debt you should be aware some measures can be taken to help get yourself out of debt. Many credit card companies offer hardship payment plans if you find you monthy payments are for you unmanageable for you. Sometimes you can do a balance transfer from one card to another card to avoid interest fees that may be killing you. This is the most wisely performed when one credit card company is offering a promotion with 0% interest or a very small interest for a promotional period when balance is transferred. You should only request this balance transfer if you are sure you can pay off the balance within the promotional period. If not you may get stuck with an even higher interest rates than you started with. It is very important to understand any credit card you open to not get into credit card debt.

Updated: January, 5 2012