Tips On Managing Credit Card Debt For First Time Users

Credit cards can be a boon and a bane, all at once! The tiny plastic card gives you the freedom to spend your money when and where you wish without having to carry wads of bank notes with you. These are easily accepted all round the world, whether it is over the internet, for hotels, for retail shops and even for utility bills. Credit cards can even give you cash at any time of the day. No wonder, millions of people around the world have become dependent on credit cards! However, the other side of the coin talks for huge debts that millions of households all around the globe are incurring because of either misuse of the plastics or out of sheer ignorance.

The worst affected among all are the first time users. These young people feel the empowerment of free spending that comes with the credit card and often forget about the pitfalls of it. Here are some tips for all first time credit card users that will help them to avoid building up unmanageable debts on their plastics.

- Tip 1: Keep a restricted upper limit of credit on your card. It is human nature to get tempted if there is a lot to spend. Therefore if you have a low credit limit on your card, then you would automatically not be able to spend over that. Most credit card companies offer their new and well paying customers increase in their credit limit from time to time. Avoid getting tempted to agree to these increases. In fact requesting your credit card company to decline charges once the threshold limit is reached will help. Keeping a low limit will also come handy if your credit card is misused by a friend or family member or stolen without you realizing it for days.

- Tip 2: Avoid taking cash advances on your credit card. The interest rate on cash advances is often higher than on normal purchases. Whenever possible, try and get a purchase charged on your card instead of taking out a cash advance on your credit card for its payment.

- Tip 3: Try and keep the outstanding balance on your credit card at less than 66% or 2/3 of your credit limit. This will help you avoid maxing out your card. The extra available credit will also come handy incase of emergencies. If you find that the outstanding balance on your credit card has exceeded 66% of your credit limit, try to pay off some amount of it before you start using it again.

- Tip 4: Try and pay off as much as you can every month. If you pay just the minimum required every month a large part of the payment will be directed towards interest and your outstanding dues will not be affected. Hence, making larger payments will help clearing your balance faster.

The best way to avoid building up unmanageable debts on your credit card is to avoid the temptation to spend on it. If you find yourself reaching for your card even when you should not be, consider leaving it behind at home or better with your parents. Only a responsible spender is able to beat the tricky system of credit cards!