Six Ways To Avoid Credit Card Debt Trap

Six Ways To Avoid Credit Card Debt Trap

Six Ways To Avoid Credit Card Debt Trap‘ intends to give you simple yet effective measures that you can take to ensure sound credit card and financial management. At the outset when we opt for a credit card, we tend to set firm rules about using plastic money wisely but as time passes, those rules wane and we slide into a mode which leads us into a spiraling credit card debt.

Credit cards will cater to our needs if used responsibly but this double sided sword can hurt and harm you without warning. So it is imperative on your part to draw thick and visible lines for yourself which you cannot cross or meddle with.

Six Ways To Avoid Credit Card Debt Trap

Credit cards offer a great deal of convenience and also it a great friend in times of emergencies. But if you are in the habit of splurging and buying impulsively, then no can save from a uphill battle against credit card debt for years to come.

Having said this, a few simple steps can always ensure that you are in control.

Here are 7 simple things you can do to avoid a credit card debt trap:

1. Keep a tab on the number of credit cards you own! Fewer is better

There is saying, ‘too many cooks can spoil the broth‘. Similarly, owning too many credit cards can make you lose focus. Having too many credit cards is riskier and less valuable. Too many plastic cards means having too much spendable credit on hand and this can easily lure you into purchasing unwanted and unnecessary items which you can do away without or postpone. Owning two or three credit cards for specific purposes is ideal.

2. Repaying credit card with another credit card

Applying for a new credit card to pay your existing credit card debt in itself says it is a desperate measure.This cycle is never ending because it does not change anything in the first place.

3. Do not stick to paying minimum amount on your credit card

Paying just the minimum amount on your credit card month-on-month is not ideal. The minimum amount is just 5% or less of your total credit card outstanding amount. Not only it affects your utilization ratio but also the interest keeps accumulating. Ideally, you should pay your credit card bill in-full every month. This way you have used a loan without paying any interest. But if you are not able to pay in full, at least try to pay the maximum possible.

4. Always keep looking for lower interest credit cards

Credit card interest is one of the biggest killers. It keeps accumulating on your outstanding credit card balance. If you are in the habit of carrying a balance and not paying in full, then you are better off with a lower interest credit card. Avoid retail stores credit cards as they come with strange spending thresholds and also maximum benefits can be achieved through specific purchases. If you are a frequent traveler, go for a card on which you accumulate air miles and also which gives you discounts or free tickets.

5. Try and avoid annual fee

There are credit cards which are free of any annual charge. But most come with an annual fee. If you own multiple credit cards but use only one or two, then check if there is an annual fee on the ones that you don’t use. Of course cancelling them would hurt your credit score and also increase your utilization ratio. So you need to chalk out an effective strategy to handle this situation.

6. Use secured credit card to re-build credit

If you have stumbled in the past and struggling with a credit card debt and a bad credit score, then you can opt for a secured credit card which helps you to re-build your credit. Secured credit card needs you to keep a deposit with the bank and again, you credit limit will be low. This will ensure that your purchases are low and you do not buy impulsively.

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