Credit cards often charge a higher interest rate than other types of credit – the average credit card rate currently stands at around 16-18% (depending on which statistics you look at). This means that over time, your credit card debts could cost you a lot of money in interest unless you clear your balance on time every month.
Of course, the best way to avoid credit card debt is to do without credit cards altogether! But that isn’t necessarily the most sensible option. Even if you hardly use them, credit cards can be a very useful ’safety net’ against financial emergencies.
With that in mind, avoiding credit card debt should be more about minimising the need to use your credit card. And if you do ever need to use it, make sure you pay off the balance before the end of the month to avoid paying interest.
Here are some tips to help you avoid credit card debt.
Keep a tight budget:
A well-planned budget helps to ensure that you never overspend and always have enough put aside for your bills and other essential living costs. And if you owe money on a credit card, it could help you repay that on time, too.
To plan your own budget, add up your essential monthly outgoings (you should look at a few recent bank statements to make sure you’ve included everything) and subtract the total from your take-home pay. Then ensure money for your outgoings is put to one side, perhaps in an instant-access savings account, so you can’t accidentally spend it on other things.
Put money into savings:
It’s always worth having a savings pot that you can dip into in an emergency, rather than using credit (and paying interest). Paying for something expensive like car repairs on credit could make it very difficult to get back on top of your finances unless you have plenty of room in your budget.
Remember: if you ever do find yourself struggling to repay credit card debt, don’t hesitate to get help. The sooner you do so, the easier it’s likely to be to get back on track.
A debt adviser can point you in the direction of an appropriate debt solution, and if necessary they may be able to give you help negotiating credit card debt repayments with your lenders.