Avoid Credit Card Debt and Live Debt-Free

Avoid credit card debt?  With the right frame of mind plus a dose of determination and discipline, this is possible.  No, don't throw them away just yet because using them has some good points in their favor.  There are frequent flier miles and dividend cash to earn and credit rating to boost.

A dose of prevention is worth more than a pound of cure.  While it is true that teaching the young ones all about money could be such a turn off, still it is more worth than getting them out of debt that by that time would have cost hundreds if not thousands of dollars.  There are so many resources that can help you do this.

It is no secret though that to get the most of this plastic money, it has to be used properly.  To avoid credit card debt is easier than getting out of it which is quite a difficult task.  Many have fallen into this financial hole and found out how hard it is to get out of it.  Following are few simple rules that will help avoid the credit card debt.

  • Manage your finances by creating a budget and sticking to it with the monthly income and expenses and 5 to 10% set aside for emergencies figured in before using the plastic money.
  • Establish good spending habits like not buying anything that you cannot pay for in full at the end of the month.
  • You don't need more than one or two cards. Each one comes with a different set of rules and will be quite a responsibility to remember all the penalties, the interest rates, etc. especially if you don't pay the full balance each month.
  • Use the right card with no annual fee and low interest rate.
  • Know the interest rate even down the road by looking it up in your statement as the credit card company can change your interest rate anytime for no apparent reason even when you do not have a balance.
  • Read the fine print even though it is such a bore because this can save you hundreds of dollars and a headache later on.
  • Treat it as cash instead of plastic money so buy only anything you can pay off in full at the end of the month.
  • Don't use the credit card like a loan for it will be at a high interest rate.
  • Little extra expenses can sneak up on you so avoid them.
  • Avoid also cash advances for they incur the highest interest rate as much as 20% and you will continue paying this high interest until you have paid off all your purchases. Also there are transaction fees and no grace period for this.
  • They will also try to sell some protection products which you really do not need, so just say no.
  • Choose purchases wisely by making sure you are not accumulating a balance with interest higher than the dividend or the flier miles you will receive. Check all the interest rates and fees they charge.
  • Keep all receipts and check them against the statement. Report all charges that you do not recognize.
  • Monitor your charges so you do not go over the 30-50% of the available limit because if you go over that, your credit score could go down and interest rate could go up.
  • Pay the balance in full each month or you will pay a lot of money to them for the privilege. When this happens put away the plastic money until you pay off the balance.
  • Pay on time every bill you have for late payment on any of them could impact your credit card interest rate. Pay online so you will not be late.

There you have all the rules to follow so you will not get into trouble when using plastic money.  Remember that there are good points for using them but they have to be used wisely or the money you work hard to earn will just go down the drain.  Also when you follow the rules, you will avoid credit card debt.

How about you?  Have you done or know of a way to avoid credit card debt?  Please share it with us in the comment box below.

By Roger Guzman, M.D. and Evelyn Guzman

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Article 86 Avoid Credit Card Debt and Live Debt-Free

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