How to Use Credit Cards without Going into Debt
Credit cards are a common payment method. They’re convenient, many cards allow you to earn points or rewards, and if you use them carefully you could even improve your credit score. However, because they’re so easy to use, they can also lead to big debt problems if you’re not careful.
Credit card debt can be easy to get into, but also tough to get out of. This is especially true since many cards charge relatively high interest rates. Here are some tips for how you can use credit cards without ending up in debt trouble.
Have a Budget
Everyone needs to have a budget, no matter how much you earn. If you don’t have a monthly budget, create one. The goal is to spend less money each month than you earn. If you have a budget, and you stick with it, you’ll always be able to pay your credit card bill since you won’t spend more than you can afford to repay each month.
Track Your Spending
It’s nearly impossible to stick to a budget if you’re not tracking your spending. Whenever you make a purchase, note it down somewhere. You can use an app on your phone, you can create a spreadsheet on your computer, or you can use a pen and paper to track your spending. No matter what method you choose, it’s important to record your purchases shortly after you make them. This way, you won’t end up spending more than you budgeted.
If you find that you’ve gone over your spending limit in a certain category, you’ll want to adjust the rest of your budget so you don’t spend more than you have available this month.
Save Up for Big Purchases
Just because you have a credit card, it doesn’t mean you don’t need to save up to make a large purchase. If there’s something you want and it doesn’t fit into your regular monthly budget, you’ll need to adjust your plan so you can put some extra money aside for the new purchase.
Treat your credit cards the same way you would treat spending cash. If you don’t have money for something right now, don’t buy it until you’ve saved up.
Limit Your Credit Cards
The more credit cards you have, the more likely you are to overspend. Most people have a couple different credit cards, but it’s important to try to stick to a relatively small number. If you have many different cards, only carry a few of them with you when you go out. This will eliminate the temptation to overspend.
Always Pay More Than the Minimum
If you only make the minimum payment on your credit cards, you’ll end up paying a large amount in interest and it will take you a very long time to pay your balances off in full. This is why you should always strive to pay more than the minimum.
While paying your entire balance every month is ideal, if this isn’t possible, structure your budget so that you can pay as much as you can each month. The quicker you pay off your cards, the less you’ll spend on interest.
Have a Plan to Pay for Purchases
You should have a plan for how you’re going to pay off your credit card bill. Each time you make a larger purchase, spend some time figuring out how you’re going to pay the larger bill before you spend the money. If you can’t reasonably see how you’ll be able to afford to pay your bill, don’t make the purchase until you have a plan.
This strategy can also help you avoid making “impulse purchases.” If you commit to not buying anything until you have a plan for paying it off, you’ll be much less likely to buy things without thinking the purchase through.
Know How Much You Owe
Many people who end up in debt trouble stop looking at their statements because doing so makes them anxious or worried. Even if you can’t pay your credit card balance off in full, it’s still important that you know how much you owe. Look at your bills each month and, if you see them getting out of control, commit to putting the card away and living off cash for a while until you can get your debts down to a reasonable amount.