Kredittkort: How to Avoid Credit Card Debt

We use credit cards for one major reason and that’s the fact that they give us access to funds we do not have. This can be a blessing or a curse depending on how you approach it. In America alone, over 15% of the populace have debts spanning 15 years. Now, that’s some disturbing statistics and it’s become obvious people need to be educated on the proper use of these cards.

In this article, we will look at how to avoid debt, the cause of debt, and the difference between a debit and a credit card. Just read carefully so you don’t miss any vital information.

Causes of Credit Card Debt

Learning what factors could lead to a higher possibility of debt would let you know how to best avoid it. If you searched about this on google which led you to this article, it means you’re looking for a way to break free and you are not alone.

In fact, the total credit card debt in America has reached a whopping $1 trillion. Now, that’s a lot of money! 

Overspending

Access to extra cash can be intoxicating; especially when you did not work for it, and it takes a really disciplined person to avoid this trap. Overspending occurs when you buy more than what is necessary.

Overspending

This can take the form of impromptu vacations, shopping sprees, and extravagant spending. When you spend more than you can pay it is inevitable that you’ll end up in debt. Check out this video https://www.youtube.com/  to learn more about money management skills.

 Unplanned Expenses

There is a reason why it is advised that you make a list beforehand of things you want to spend money on. This allows you to make informed decisions knowing the state of your finances. Oftentimes, due to indiscipline or whatever reason, many people buy things immediately the thought crosses their mind. 

When this becomes a habit, any plan you make for your monthly expenditure becomes null and void because a habit of impromptu spending compromises it.

Medical Bills

While most of the causes of credit card debt can be avoided, sometimes emergencies do occur. At this point, you are left with no other option but to collect money even though there is no repayment plan in sight. 

The hike in medical care costs in recent years has not helped matters either. Get health insurance you might say, but an insurance company can only cover so much. Sometimes you can’t escape making it up from personal funds. Only people with “full health coverage” can avoid falling into this category. Visit here to learn more about how health insurance can help you.

Divorce

Marriage is expensive but getting out of one cost even more. In situations where assets are not able to cover the divorce split, credit cards are often used. You can see how this could lead to accumulated debt. In some states, you can expect to pay as much as $20,000 to leave a marriage. 

Divorce

If the assets shared during the split don’t put you in debt, losing the support of a partner might. Most households rely on the two income streams to function. When you take away one person, plus the money the divorcee takes with them, it is easy to see how quickly one can fall into debt.

No Emergency Funds

One thing about life is we never know what could happen at any time. This is why we should always have a backup plan. Loss of a job, health issues, vandalized home, or any one of a thousand other unplanned events could wreak havoc on a person’s finances.

If you do not keep a backup fund, chances are you will be forced to take out money from your credit card. Of course, repaying this at the end of the month could prove to be a challenge because of the “emergency”. Just like that, one can get into debt.

How to Avoid Credit Card Debt

Getting into debt is not the end of the world. By being disciplined and taking the right steps, one can bounce back and get on top of one’s finances again. The following steps can be followed to avoid getting into credit card debt.

Create an Emergency Fund

Having a set amount of money to fall back on in the case of an emergency can be your saving grace. Set aside a certain amount of money every month and ensure these funds are never touched except an emergency occurs.

Create an Emergency Fund

You don’t need to start big. Little deposits overtime accumulates, and you’d be shocked just how much you’ll be able to save a few months down the line. This way, you don’t need to use your credit in times of trouble. 

 Make Sensible Purchases

This is one of the easiest steps to implement when avoiding debt. Simply stick to what you can afford and resist the urge to make unplanned purchases. It also helps if you plan for big expenses. 

For example, instead of buying an item worth $2,500 immediately, spread the bill over the course of 5 months. This takes off the pressure you might feel at the end of the month.

Make Monthly Payments on Time

The problem with chronic credit card debtors is they carry the previous month’s payments over into the next month. This is wrong and will increase your interest rates exponentially. Let’s not forget it will also affect your credit score, thus making it hard for banks and other financial institutions to trust you. Carrying over debts is a slippery slope.

With each new month, it gets harder to pay the outstanding balance and before you know it, you’re “knee-deep” in debt. 

Use Credit Cards that Reward You

Credit cards offer incentives to encourage customers to use them. These rewards can range from cashback to points that can be used to make purchases and much more. This way, you earn money when you spend money.

These rewards can help relieve expenses you would otherwise have made, thereby allowing you to save cash. 

Final Thoughts

The problem most times is not getting a credit card but using it responsibly. An irresponsible user is plagued by debt and late payments. If you maintain a disciplined approach towards your spending, you can avoid falling into debt. It’s also not the end of the world if you do find yourself in debt. Just take a closer look at your spending habit and you might just find the problem

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