In an article on credit card debt, the author divides the factors that affect how much people who carry a balance end up paying in interest charges. There are 5 factors that make up how much people pay in interest charges – their debt-to-credit ratio, whether they carry a balance month-to-month or on a longer term loan, what cards they use to get their money, when they start using them, and if they are told by their lender that this is okay.
Don’t charge more than you can afford
One of the most simple ways to avoid credit card debt is to not charge more than you can afford. This means that if you spend $250 a month on your card, then only charge $250 each month. If you want to avoid paying interest, it is best not to purchase anything with your card unless it’s absolutely necessary.
Don’t carry a balance month to month
Credit cards can be a useful tool when used properly, but if you don’t pay them off at the end of every month, they can quickly become an expensive burden. You should only use the credit card that you know you can manage on a monthly basis. If it is difficult for you to consistently pay the monthly balance, it’s best to take out a loan or find another way to avoid credit card debt.
Do pay off your balance in full each month
It’s wise to pay off your balance in full each month because you’ll avoid interest charges. When your account is fully paid off, it will actually have a lower balance than when you started. Many credit cards offer rewards of cash back, airline miles, and shopping points on purchases made with their card. These types of rewards can add up quickly since they are based on the amount of money you spend.
Do not use credit cards for everyday spending
Credit cards are very convenient for everyday transactions. However, it’s important to remember that credit cards should only be used for specific transactions and not every day.
Do not use credit cards as an emergency fund
Credit cards can be a lifesaver for people facing emergencies. However, if you are going to use credit cards in case of emergency, make sure to pay the balance off as soon as possible. If you can’t pay it off in full every month, don’t use the card for regular purchases and only use it for emergencies.
Conclusion
It may seem like a good idea to use a credit card to keep your purchases on track, but it is important to remember that credit cards carry interest so the balance will always grow. This can lead to more spending. But if you are diligent about paying off the balance each month, you can avoid debt altogether.