In a country whose economy is powered by consumer spending, credit cards make it all too easy to rack up debt very quickly. In the fourth quarter of 2018, Americans owed almost 900 billion dollars.
If you rely on your credit card and suddenly you experience a financial crisis, you could find yourself in massive debt before you know it.
Ready to learn how to avoid credit card debt? Keep reading!
1. Be Aware of the Risks
When you face unexpected expenses, you need more information now, not later. The consequences of credit card debt extend well beyond the money owed.
If you have a secured credit card and fail to repay the debt promptly, your asset used as collateral could be repossed. Your credit score will also take serious damage. A lower credit score can hurt your chances of getting a loan, rental housing, or even a job.
To avoid credit card debt, one simple trick is not to use the credit card to buy anything you can't afford. If you couldn't buy the item or service with the cash you have on hand, you shouldn't buy it in the first place.
2. How to Avoid Credit Card Debt: Lower Your Costs
Another great strategy is living below your means, which includes cutting back on frivolous spending. Just because you can spend more money doesn't mean you should.
Consider cutting back on your grocery spending, avoid buying that expensive coffee or maybe get rid of your streaming services until the financial crisis passes. If you don't have money left over at the end of your pay period, consider ways to cut back further.
3. Increase Your Income
If you figure out ways to increase your income, you will have more flexibility and be able to pay off emergency bills quicker and easier. Consider asking for a raise or look for opportunities to supplement your income.
4. Pay Off Your Debts as Quickly as Possible
Many credit card companies offer users the ability to make minimum payments -- as little as $25 -- towards your balance, which is surprisingly dangerous. If you only pay the minimum amount, the remainder continues to accumulate interest
5. Contact Your Credit Card Company
Depending on your annual percentage rate or APR, accumulating interest could mean hundreds or even thousands in additional debt. If you have credit card debt, you should pay off the most debt you can every month to prevent this from happening.
You should also take pains to avoid taking out cash advances on your credit card. Unlike a debit card, any money you withdraw though your credit card will be subject to the same APR as any purchase.
You should also consider contacting your credit card company to see if you qualify for consolidation loans with a lower interest rate. Most people who ask for a rate reduction will get it, particularly if they threaten to stop using the card after debt repayment. The lower your monthly bills, the more money stays in your pocket to help you avoid debt.
A Little Planning Can Make a Big Difference
If you make a plan and stick to it, you should be able to get a handle on your finance. And with this guide on how to avoid credit card debt during a financial crisis, you're sure to come out of any emergency without any financial troubles.
For more information on how you can get out of debt, keep reading our blog.