Too much credit card debt can affect your credit score, since 30% of your score considers the amount of your credit card balances. Not only will credit card debt affect your credit, it also affects your entire finance life. Credit card debt can keep you from putting money toward retirement, paying off your home, or even from sending your children to college. You can avoid credit card debt if you take the right steps.
Charge what you can afford is the one thing you need to do to keep your credit card debt from getting out of control. If you keep your credit card balances at a level that you can handle, you never have to worry about credit card debt.
What you can afford to charge is often a lot lower than your credit limit, which is the maximum amount your credit card issuer allows you to charge. As a general rule, you should keep your credit card balances below 30% of your credit limit, but what you can afford to charge could be lower than that.
Pay your balance in full each month. When you charge what you can afford, paying off your credit card balance every month won’t be difficult. Your wallet can handle your credit card balance and there’s really no reason you shouldn’t pay your balance in full. You’ll keep a $0 balance and your credit card balance never has the chance to grow into debt that you can’t afford.
Limit your number of credit cards. The more credit cards you have, the more you’re able to charge. If you have several credit cards in your wallet, you may be tempted to use them. A few purchases here and there seem harmless individually, but when you get your credit card statement in the mail, you realize that you’ve overdone it. Having just a few credit cards can help you avoid credit card debt.
Keep money in a savings account. When you have money in savings that you can fall back on in case of an emergency, you won’t have to use your credit card to bail you out. Chances are, if you don’t have the money to fund an unexpected expense, you won’t have the money to cover an unexpected credit card charge. Start putting money in a savings account to cover those rainy day emergencies.
You can avoid credit card debt by being proactive. Think twice before making charges on your credit card, especially those that you can’t afford to pay off immediately.