Part 1: 10 important tips to steer clear of credit card debt

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No matter which credit card you use to cover your expenses, the fact that you have it means you run the risk of being in debt if you do not use it responsibly. A little mindless spending here and there or a missed payment will make matters worse.

As you begin to accumulate credit card debt, you should also be prepared to make many lifestyle changes to pay it all off.

Remember, credit cards come with high interest charges that compound with time. And a considerable credit card debt has the potential to not just sink your finances and cause stress but also impact your credit score.

A little caution, however, can go a long way in helping you avoid this in the first place.

Here is the first part of the 10 tips to steer clear of credit card debt.

Tip 1: Never miss a payment

The first step to avoiding credit card debt is to stay on track with all your monthly credit card payments.

Even a single missed payment can snowball into a substantial amount with compounding charges and high interest rates. You’ll even have to deal with a late payment fee and even higher interest rates for the subsequent months.

Moreover, the next monthly payment that’s due will include all of these additional charges along with what you owe for that month.

Before you know it, you’ll be stretching your finances to catch up and run the risk of missing more payments.

If need be, consider giving a standard instruction so that your full payments are automatically charged and you don’t run the risk of missing a deadline.

Tip 2: Watch out for signs of debt

It’s no surprise that many of us fall into the trap of credit card debt because we don’t keep a track of our spends and repayments.

So it only makes sense that you watch out for the early signs – constantly rising monthly payments and ever-increasing interest charges among others.

If you’re finding it hard to pay your entire outstanding balance every month, you’re may be headed towards building up debt. As a result, make sure you catch all those early warning signs so you avoid the pitfalls of credit card debt in the first place.

You should consider drastically cutting down on wasteful expenses so that you have ample money to pay off your credit card bill.

Tip 3: Stay clear of unaffordable items

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Having a credit card isn’t a license to buy anything and everything that you set your eyes on. Nor is it an extension of your regular cash flow.

In fact, you should be smart about your expenses and only use the card for charges you can afford and need.

Whether it’s a fancy suit, a designer gown, or even the latest smartphone, remember that you should stay clear of buying them if you can’t afford to pay cash for it.

Tip 4: Save up for a rainy day

One of the most common reasons why most people end up with credit card debt is that they use the card to cover major unforeseen expenses.

A car repair job, hospitalisation expenses, tuition fees, or even an impromptu vacation can all end up as expenses on your card.

All of these expenses could have been covered without a credit card if you had saved up and set up an emergency fund beforehand.

So, if you wish to avoid struggling with credit card debt tomorrow, make sure you start saving up today for that proverbial rainy day.

Tip 5: Make all your credit card payments in full on time

Paying only the minimum amount due can temporarily delay imposition of late fees and other penalties based on the terms and conditions of your credit card issuer, but don’t rely on it too much.

Instead, keep track of all expenses charged to the card so that you can afford to pay the total bill (and not just the minimum amount due) in time and there’s no room left for unpleasant surprises later.

This article first appeared in BBazaar.my

BBazaar Malaysia (BBazaar.my) is part of BankBazaar International, the world’s leading neutral online marketplace that helps people decide on financial products such as insurance, credit cards, fixed deposits, saving accounts, mutual funds and many more.