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We all love credit cards. They enable us to buy what we want when we want without having to worry whether we have any money. This has made credit cards quite popular, and according to the latest statistics, the average American has at least four credit cards, and two in every three Americans have a credit card.

 

We can all agree that credit cards provide financial convenience. However, if misused, you can find yourself with considerable debt and a low credit score as a result. In fact, according to the Consumer Credit Review by Experian, the average credit card debt was slightly above $6,000 in 2019. Credit card debt can occur due to many reasons, some of which are preventable. If you want to prevent accruing credit card debt, then read on to find out.

 

Keep Your Utilization Ratio Low

I try to keep my credit card balance less than 50% of my limit. Having a considerable balance (more than 50% of my limit) can negatively affect my credit score. It might also be hard to fully settle such a high balance by the end of the month. Therefore, it keeps on being carried over month on month as the interest also increases. So, you might want to reduce your utilization ratio.

 

Pay Your Bills on Time

This may sound simple, but you might be surprised at the number of people who never make payments on time. Most people forget that credit card companies make money from added interest and that outstanding balances attract high interest. This interest is added to your next payment, and the more you default or make late payments, the more the interest. Also, late payments and defaults lower your credit score. I avoid all this by paying my credit card payments as the first thing to reduce the risk of forgetting.

It can be quite tempting to make the minimum payments on your credit cards. However, this can lead to you being charged higher interest rates. When it comes to credit cards, the best thing is to pay the remaining balance in full. However, we all know that money can be tight at times, and you may not make the full payment. In that case, I just pay more than the minimum amount due.

 

Spend Wisely

One of the biggest reasons credit card debt occurs is by spending too recklessly. For example, buying an expensive item when you do not nearly have enough money to pay for it, even after payday. Or it could be recklessly spending on various small things until the bill becomes more than you can pay off on time.

One of the best ways to prevent this is to put a spending limit on your credit card, this can help you be conscious of your limits and reduce the risk of splurging on expensive items. Using the likes of Walmart coupons and other special offers when you shop can also reduce your credit card expenses. Finally, making a budget and sticking to it can reduce unnecessary purchases and ensure you have enough money in the bank to pay off your necessary purchases.
 

Avoid ATM Withdrawals Using Your Card

Credit cards allow you to withdraw money from ATMs, but I always try to avoid making withdrawals. Why? Because withdrawals via an ATM attract hefty charges immediately. So I avoid using my credit card as a debit card or as a cash advance option.

 

Tackle the Biggest Interest Rates First

If you have multiple credit card debts across different cards, you need to tackle the one with the highest interest rates first. However, do not rush to clear the debt if it leaves you with no money, and you have to get another credit card. Create a plan for the frequency and duration of payments. Also, do not forget to pay the minimum dues on the other cards.

 

Assess the Promotions

I must admit that credit card advertisements and loyalty points are very tempting. It seems that these rewards just keep getting better and better with each new card that rolls out. These promotional offers can lure you into getting one extra credit card, and before you know it, you are drowning in credit card debt. So, I always investigate the offers further and determine whether I need another credit card or I just want the rewards that come with it. In most cases, I realize that I did not need an extra credit card.

 

Take Note of the Renewal and Joining Fees

Many cards have renewal and joining fees. As I select a credit card, I make sure to know these two costs, then I choose a card whose fees are reasonable compared to the benefits I will get.

 

Buy Big on Credit

Credit cards make shopping easier such that you end up using them to make small purchases. These quickly add up over time and increase your monthly payments. Thus, I always make small purchases using cash or my debit card and only use a credit card to make big purchases.

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