While credit cards can be very convenient and provide access to needed funds, they also can lead to debt-related problems that can be difficult to get out of, report credit consultants at the nonprofit Credit Card Consolidation Secrets. Credit card companies could do a better job of educating consumers in how to avoid excessive debt, but the ultimate responsibility remains with the credit card user. There are a number of ways you can avoid excessive credit card debt.
Step 1
Pay for your next and every other purchase with cash, debit card or check. Save your credit cards for emergencies only. By reserving your credit cards for emergencies, you get out of the habit of thinking about them as extra money, which they are not.
Step 2
Plan your purchases. Credit cards are an important tool in today's world for a number of reasons, from renting a car to making online purchases. Use your plastic only when there is no other way to fund a purchase and have the money available to pay it off as soon as the bill arrives.
Step 3
Reserve your purchases only for those items for which you can use a debit card that draws money from a checking account or pay with cash. There is no way to build up excessive credit card debt if you don't use the cards.
Step 4
Create a budget by listing all your fixed expenses such as mortgage or rent, utilities, car payments and insurance. Figure out how much you need for food and clothing. Write down your income and consider any extra funds as your available spending money. Follow this budget to maintain your debt ratio and avoid harmful spending habits, advise counselors at the Federal Trade Commission (FTC).
Step 5
Call your credit card companies if you are having trouble making payments. Many credit card companies can begin to work out a plan for you to pay off your debt without incurring additional charges or being turned over to a credit collection company.
Tips and Warnings
- Give your credit cards a rest if you have accumulated too much debt and must begin to reduce your total credit card debt. Once you've created a plan and lowered the amounts you owe, then you can begin to practice better spending habits to avoid excessive credit card debt in the future.
- If you end up seeking help from a debt consolidation company or credit counselor, look for one that offers in-person interviews. The FTC warns consumers about disreputable credit counselors that charge hidden fees and could end up creating even more debt for consumers. Ask friends or family, your banker or a local cooperative extension center for a referral instead of blindly choosing a credit consolidation firm online or in the phone book.
Things You'll Need
- Cash
- Budget
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