Follow these tips to keep your credit card debt under control.
How to avoid credit card debt
Need help steering clear of credit card debt? Just follow these tips!
Don’t carry a balance
The best way to avoid credit card debt is not to accrue any, and that means paying off your balance in full every month.
When you carry a balance, you’re essentially using your credit card as a super-high-interest loan. If you want to make a large purchase that you’ll spend months paying off, just take out a personal loan! It’ll cost you less in the long run.
Ideally, you should never use your credit card to make a purchase that you couldn’t afford to pay off by the end of the month. Of course, if you’re in a crisis and don’t have another way to get money, do what you have to do. But don’t use the card again until you’ve paid off your balance in full.
Build an emergency fund
Having a healthy emergency fund is a great way to avoid credit card debt.
Putting aside a chunk of your savings will protect you from debt in moments of crisis. If you need to pay for an unexpected medical expense, you won’t need to put the charge on your credit card. Instead, you can simply tap into your emergency fund!
Ideally, your emergency fund should hold about 6 months worth of living expenses. This way, if you find yourself unemployed, you won’t be forced to use credit to pay your bills.
Need help setting a budget and figuring out how much to put away each month to build your emergency fund? These money management tools can help.
Limit your number of credit cards
If you want to avoid credit card debt, you should never have more than one or two credit cards at a given time. That’s because acquiring more credit cards raises your total credit limit. And even if you have Herculean self-control, there’s no reason to tempt fate. All it takes is one bad day for you to bury yourself in high-interest debt that could take years to pay back.
Don’t use credit cards to get cash
Sure, it’s easy money. But beware the hidden fees and higher interest rates of credit cards. If you use credit cards to withdraw cash, you will likely see:
- Upfront fees of 2-4%.
- A higher interest rate than you’d pay on regular charges.
- No grace period — you’ll owe interest as soon as you receive the money.
- Your monthly payments going to the balance with the lowest interest rate.
So if you want to avoid credit card debt, don’t use your credit card to get a cash advance. If you really need cash, just go to the ATM.
How to eliminate credit card debt
What if you’re already carrying a large balance? These tips can help you get your current credit card debt under control.
Don’t touch the card until you’ve paid off your balance
Yes, it might be hard. But if you want to regain control of your finances, put your card away, and don’t use it again until the balance is zero.
Always make more than the minimum payment
Not sure how much to spend on your credit card payment every month? We’ve got a pro tip to simplify the process for you.
Take a look at the bottom right of your credit card statement. You should find a federally-mandated box telling you how long it will take you to get out of debt.
The box includes two sections. The first shows you how long it would take if you made only the minimum payment. Depending on how much you owe, that could well be 30 years – the term of an average home loan.
The second section shows what you’d have to pay per month to get out of credit card debt in just three years. We recommend that you pay this amount (or as close to it as you can get). Otherwise, you could end up paying interest on your debt for decades.
Transfer your balance
If your credit card debt is spread out across multiple different credit cards, consider consolidating them onto a single card. Grab your lowest-interest credit card and use it to pay off the rest of your debts.
Alternatively, if you have good enough credit to qualify, you may be able to sidestep interest altogether. Many credit cards offer a 0% interest introductory period. As long as you pay off your debt within the introductory period, you’ll owe no interest at all.
However, you should only take this route if you’re able to pay off your credit card debt within the introductory period — usually around 6 months. That’s because after the grace period ends, the card’s interest rate will skyrocket.
And be sure to find out whether your credit cards charge balance transfer fees. You should only transfer your balance if you’ll save more in interest than you’ll lose in fees.
Consolidate your debts
An installment loan with a low APR is another great way to consolidate high-interest credit card debt. Simply borrow enough to pay off all your credit accounts in one fell swoop, and trade your debts for a single easy monthly payment.
These debt consolidation loans are a popular way to reduce interest expenses and establish a structured plan to get out of debt. And it won’t just save you money — it’ll also provide peace of mind. Streamlining your debt into a single payment can make the process simpler and less intimidating, improving your odds of staying on top of your payments.
Know when to ask for help
Has your credit card debt ballooned beyond your ability to repay it? It may be time to ask for help.
First, try negotiating directly with your credit card company. You may be eligible for a loss mitigation program (also called forbearance or hardship programs). If your credit card company agrees to such a program, they may let you postpone some monthly payments. Or they may lower your interest rate until your balance is repaid in full. They may even be open to negotiating a debt settlement.
However, negotiating with creditors can be tough. If you’re in over your head, it’s okay to call in the big guns. A competent debt settlement company can be your advocate, negotiating with your credit card companies to secure reduced payments or adjusted payment plans.
Whether you’re still working to repay your debt or you already have debt collectors knocking at your door, a good debt settlement company can help.
Ready to get started? If you’re looking for a credit card with a 0% interest introductory period, you can compare our top recommended credit card companies here.
Or if you’d rather consolidate your debt with a loan, check out these reputable lenders.
Past the point of no return, and need an expert’s help in getting back on track? Compare debt settlement firms here.