Credit cards can be very useful. They can allow you to make purchases without your bank balance taking an immediate hit.
Nonetheless, there are some potential drawbacks to using credit cards, and they can be a significant source of debt. Here are a few tips that may help you stay out of credit card debt.
Keeping up with payments
It may sound obvious, but it is vital to keep up with minimum payments each month. You have a better chance of doing this if you spend within your means. For instance, the minimum payment on $100 balance will be lower than the minimum payment on a balance of $1,000. Missing payment or even being late with payments can result in extra charges and it will impact your credit rating.
The amount of your credit line that you use each month is often referred to as the utilization ratio. For example, if your credit card has a limit of $2,000, and you spend $,1000 that month, you have a utilization ratio of 50%. It is recommended that you keep your utilization ratio at 30% or below to avoid getting into serious debt.
Avoid overreliance on credit cards
It can be very easy to acquire multiple credit cards. The problem with this is that it can be hard to keep track of spending. If a credit card is a necessity, then it’s better to have one card with a higher limit than multiple cards with lower limits. Losing track of spending on even one card can result in debt issues.
If you have fallen into overwhelming credit card debt, then you do have options. Bankruptcy is one option if paying the debt off is unrealistic. This is a big step, so make sure you have first sought legal guidance.
