Credit Card Debt: 5 Tips for Avoiding a Problem
Many consumers fail to consider the pitfalls of credit card debt until they’re already in trouble. After all, high schools may teach students how to find the area of a triangle and the folly of Seward’s Alaskan purchase, but they explain little when it comes to real life finance. This means that many young people get their hands on a thousand-dollar credit line before learning how to responsibly handle that kind of power. Predictably, this has led to record highs in consumer debt, leaving millions to look for a way out of the minimum-payment cycle. If you want to avoid this scenario, here are five tips you should remember.
Create (and Follow) a Strict Budget
Financial advisors often recommend living beneath one’s means, but perhaps no other piece of advice is so ignored. There are a few reasons for this, but the main one is that most people have no idea where their means begin and end. To know, you’ll need to create a strict budget based on your income and avoid straying from what you’ve calculated.
Pay Off Balances Quickly
Keeping and using a credit card can improve your credit rating and expand your options when it comes to making big purchases such as a car or a house. That said, carrying around a significant balance for months or years at a time does you no favors. Because of compound interest that balance will grow over time, becoming a little harder to pay off with every passing month.
Watch the Rewards
One of the easiest ways to accidentally get caught up in credit card debt is through the use of reward cards. It’s difficult to refuse the lure of prizes and rebates, but be cautious as you chase those rewards. Many cards hide fees and sudden interest rate hikes, putting their customers in a difficult spot down the line.
Ask for Lower Rates
If you have a good credit record, you might consider asking your credit card company for a lower interest rate. In many scenarios, customer representatives would rather shave a point or two off the rate than lose a customer. If they aren’t willing to play ball, consider looking for a card with lower rates to which you can switch.
Beware of Introductory Rates
Many companies attract customers with the use of introductory rates. There’s nothing wrong with taking advantage of such an offer, but make sure you know exactly when your introductory rates expire. If possible, pay off any balance you are carrying before that time comes.
Even with all of the good intentions in the world, you may find yourself struggling with credit card debt after only a single mistake. If so, don’t panic. Credit consolidators can provide access to counseling and debt elimination programs to those in need. Do what you need to do to get your head above water and go back to the tips above to prevent it from happening again.