How can I avoid credit card debt?
A lot of high school graduates avoid getting a credit card because they don’t want to be in debt. Having a credit card doesn’t mean that you’re going to ruin your credit and owe a bunch of money to someone. In fact, credit cards can actually improve your credit score. You just have to know how to manage them correctly.
Causes of Credit Card Debt
There are two causes of credit card debt: bad spending and bad payments. Either you will spend more money than you can logically pay back, or you will fail to pay on a balance you owe. Both of these problems are avoidable, but don’t be surprised if you fall into one or both of them at first. It’s easy to get caught up in the excitement of spending before you realize what kind of situation you’ve put yourself in.
How to Avoid Credit Card Debt
Avoiding credit card debt is a simple process. Once you find a system that works for you, all you have to do is repeat the process. Here are some tips to help you manage your credit card:
- Don’t buy anything you don’t already have the money for. If you can pay your credit card back immediately, you will still get the credit for it without worrying about debt.
- Always keep track of your balance. Know what you have spent, what you can spend, and what you need to spend in the future. This will help you avoid overdraft fees, embarrassing declines, and most importantly…credit card debt.
- Avoid high interest rates or high annual fees. If it costs you $75 to have a credit card that you rarely use, it isn’t worth the money. Look for a card with minimal fees that match your spending habits.
- Reserve your card for emergencies. This won’t help your credit much, but it will help you avoid debt. You might want to train yourself not to use the card until you feel capable to do so responsibly.
- Watch your account for suspicious activity. This will protect you against identity theft. If you notice anything on your account that you did not authorize, contact your credit card company right away.
As you can see, you don’t have to bypass credit cards completely to avoid the debt associated with them. If you manage your money the way you are supposed to, you can build your credit and have funds left over for backup. There is no sense in having a credit card if you can’t see any practical use for it. Keep that in mind before you apply.