Tips To Avoid Building Credit Card Debt

Credit card usage is threatening to outrival cash in the retail consumer sector. Because of the convenience, ease of use, high acceptability and glossy advertisement by the lenders, millions of consumers from across the world are drawn to use this plastic instead of cash. While this is great news to the lending company and the merchants, the consumer often overlook the many pitfalls of the phenomenon called "credit cards". One of the biggest pitfalls is that of credit card debt. Statistics show that by 2008, consumers in United States alone had built up a debt of $962 billion on credit cards whereas UK was at $64.7 billion and Australia at $41 billion. If you do not want to be counted in these numbers, read on for tips on how to avoid building up unmanageable debts in your credit card.

Tip1: Think before you swipe! It has been noted that credit card users often live beyond their means and this is the principal reason why they get into debts. Do not forget that the money you charged on your card needs to be paid off and that too with heavy interest. Interest charges and penalty late payment charges can increase a $100 debt into thousands of dollars in just a few months.

Tip 2: Think of your credit card as a debit card! When you swipe a debit card, the money comes out of your current/ saving bank account. Therefore people are much more careful when using their debit card. If you look at your credit card like it being cash or your debit card, it will keep you grounded and keep you from overspending.

Tip 3: Pay off as much as possible every month. Even if you are not able to pay off the complete balance on your card, do not be happy by just paying the minimum balance due! Remember that the lending company is charging you a heft interest on your remaining outstanding balance. Hence reducing this amount as much as you can, goes a long way in helping you control the ever increasing debt on your credit card.

Tip 4: Avoid missing a payment at all costs! Late payments not only mean an accumulated interest charge on your outstanding amount but also heavy late payment penalty. This penalty can range anywhere between 20% and 30% of your outstanding balance or $10 - $20 whichever is higher. Apart from these heavy financial losses, remember that your credit rating is also getting affected. This might prove to be a hindrance when you apply for home loans or education loans later on in life!

Tip 5: Do not get into the credit card revolving debt cycle. While transferring the balance to a new credit card may seem as an immediate and easy solution to get rid of your defaulted card, remember that the amount of debt remains. Moreover, the new credit card company will also charge extra interest on the amount you have transferred. Know that it is very hard to break out of a credit card debt cycle and hence it must be avoided at all costs.

Credit card debt is a tricky business to manage. It can be said that prevention is the best remedy to avoid falling into this trap.