Avoiding credit card debt before you get yourself in trouble can seem daunting. Owning a credit card is one thing but swiping it more and more means a direct increase in your debts. According to a 2019 report, Americans carried a record of $4.2 trillion in credit card debt, which means every household in the United States carries credit card debt of about $6,194.
Using a credit card for your everyday expenses along with charging the card for medical bills and emergency expenses can further add to your credit card debt, hurting your credit score. This forces you to pay high interest on your credit, making it difficult for you to save money for your future. The only way to avoid high credit debt is to keep a balance between your spending and payment habits.
So, how to make the best payment strategy that can help you avoid credit card debt. Here are some simple steps that can help you lower your credit card debt.
Step 1: Plan And Follow A Budget
The first option is also the easiest and the best to avoid credit card debt. You must make a budget and spend according to it. Following a budgeted list will not allow you to spend on unnecessary items with a credit card which will help in avoiding credit debt.
Step 2: Use The Right Payment Strategy
Having the right payment strategy helps you pay off your debt much faster, along with letting you keep track of your credit score. The below strategies are effective in ensuring that you clear your credit card debt more quickly.
§ Pay More Than Minimum
The credit card issuer sets a monthly payment rate of about 2-3% to ensure that the credit card holder makes timely payments. Make sure you make immediate payments because the longer you delay payments, the more interest will be charged. Also, you can avoid interest charges when you pay off the balance in full every month.
§ Debt Snowball
The snowball approach means you need to prioritize your loan payments from smaller amounts to reaching more significant digits. By paying the smaller amount first, you move towards the next loan bigger than the previous one. Gradually and steadily, you will be able to pay off bigger debts and finally clear off your debts.
Step 3: Debt Consolidation
Credit cardholders with a good credit score often go for debt consolidation into one account. This way, you will have one account containing all your balances, and you have to make payment for one account only.
§ 0% Balance Transfer Credit Card
Applying for a 0% transfer credit card saves you in the long run. You can easily find a 0% introductory period (max 15-18 days). Transfer all your outstanding credit card debts to this account. This way, you will have only one payment to make each month.
Step 4: Don’t Use Credit Card For Everything
You should never pay for everything with a credit card, such as food items or daily expenses. A credit card should be used only for emergencies and bigger necessary expenses.
Step 5: Leave Your Credit Card Home
Yes, you read it right. Avoiding credit card debt is super easy when you only have the cash to pay with. This approach will also help you avoid getting unnecessary things that most people buy on impulse but later find useless.
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