10 Easy Ways to Use Credit Card and Avoid Debt

In this article I will be sharing with you ten easy ways to use credit card and avoid debt. Once most people start using a credit card, they find it hard to imagine their life without one again. Credit cards are convenient and let you accumulate reward points for trips or merchandise, and even help you avoid service charges in your bank account because you don’t debit or withdraw cash as often.

However, if you are not careful, your flexible friend can quickly become a foe. When your bank account is running near empty, paying for items you need or want with credit can cause a lot of problems. So in this article I will be sharing with you 10 easy ways to use credit card and avoid debt.

1. Save Up For Purchases

Many people run into trouble with credit cards because they spend more than they can afford to spend. Help yourself avoid this trap by saving up for purchases. Before buying anything with a credit card, make sure you could pay for it with cash on the spot. That way you will get the benefits of using the credit card without the risks of not being able to make the full payment on it. The trick is to make sure that the money you have set aside for each credit card purchase doesn’t get spent on anything else. One way to do this is to open a savings account dedicated to this purpose. Call it your credit card payment”account to help you organize your money and resist temptation. Then when the bill arrives use the money in the account to pay it. With all the money already saved, it will be easy to do.

2. Use Your Credit Card for Only One Type of Expense

Using a credit card on an ongoing basis helps to build or re-build your credit rating. But nothing says that you have to use it a lot. When you don’t want to end up in over your head, use your credit card for only one type of purchase. Choose an expense that has an automatic limit for your spending, like gas for your car or your monthly transit pass. Avoid costs that can vary a lot from one month to the next, like phone bills or eating out.

3. Don’t Use Credit to Pay for Credit

Many people use their line of credit, which has a much lower interest rate, to make their credit card payment each month. Or they may apply for a credit card with a low promotional interest rate and do a balance transfer to pay off their higher interest card. While this might reduce how much interest they pay initially, it opens the door to getting deeper into debt with more available credit.

If you really want to take advantage of a balance transfer and pay less interest, close the credit card account you transferred from and focus on paying off the account you transferred to before the promotional period ends. But be warned, the payments could be a lot more than you can afford.  Regardless how you pay your bills, get help if you are not able to pay your account off within a few months or find that you are using it to pay for regular living expenses.

4. Keep the Limit Low

Request a low limit, or if your limit is currently higher than you are comfortable with, call the credit card company to lower the limit. They are no longer allowed to raise it without your consent, so they might try to talk you out of lowering it. Stick to your guns and lower your limit to something reasonable. You don’t need high credit limits or numerous cards to build a positive credit rating, and should you become the victim of fraud, a lower limit means a thief can do less damage. You also don’t need a high limit for the odd bigger purchase, such as a plane ticket or hotel stay. Most companies will let you make a payment to temporarily increase your available credit; if in doubt, give them a call and ask. How much credit is too much?

5. Reward Yourself

Staying disciplined with your money can be hard, and it is important to keep yourself motivated. Find reasonable but meaningful ways to reward yourself when you use your credit card wisely and don’t end up in debt. For example, make a deal with yourself that if you pay off all of your credit card bills for 2 months straight, you could splurge with dessert after a meal, a favorite drink, or a small item you have had your eye on. But instead of adding to your next bill, you could also reward yourself through inexpensive activities like taking a hike, going sightseeing in your local area, having an at-home movie night with friends, or finally enjoying that book you have been meaning to read. It can be tough to stick with your plan, but staying out of debt allows you to reach your goals and that is something to be really proud of.

6. Be Accountable

Sometimes, getting the support of friends or family to stick to your goals is just what you need. Talk about the financial goals you have set, what you are doing to achieve them, and ask one or two people you are close to if they would help hold you accountable. Show them your credit card bill every month and ask them to help you through the hard times if you didn’t stick to your plan. While they can’t give you expert financial advice, they can give you the moral support to go get it if you need it. If you invite them along, they could even join you at a credit counseling appointment.

7. Put the Card Away If You Can’t Pay It Off Each Month

Sometimes things happen and plans don’t go as expected. That is okay, but it is important to take steps to get back on track. If a month comes when you can’t pay off your credit card bill in full, put it away and don’t use it again until it is all paid off. Locking it away in a safe place in your home or in a safety deposit box will make it harder to use. If needed, you could also cut it up and call for a replacement when you are ready. However, don’t try this more than once or twice, the credit card company will wonder if you are up to no good.

8. Only Have One Credit Card

Most people don’t really need more than one credit card. If you want to collect worthwhile reward points from a specific retailer or if you travel and need a backup card just in case, then you might want a second card. However, if you have any trouble at all with credit card debt, then more cards will multiply those problems. That would likely far outweigh any benefits you could possibly get. Make it your personal rule to only have one credit card. This also makes it easier to decline credit card offers when you are approached in stores, receive offers in the mail, or get bombarded by online ads and emails.

9. Build Credit Without Going Into Debt

Using a credit card responsibly is a great way to build credit. If you are worried that you will overspend, don’t use the card for shopping. Instead, set up one pre-authorized charge for a set amount each month, such as a gym membership, and then lock the card up. You will still build a positive credit rating because the account is being used, and you will know that it fits your budget because you have planned for that expense. But by not carrying the card with you the temptation to overspend will be a step removed.

10. Make Sure Your Rewards Are Worth It 

Credit card reward programs might seem like a sweet bonus, but keep in mind that they also entice you to spend. The trick is to take advantage of rewards and loyalty programs without letting them influence your purchasing decisions. It really comes down to never buy something just because it will give you points. Be aware of the terms and conditions of your card holder agreements, as well as how the reward programs work. It can be easy to collect points but it may have been less expensive to purchase the reward item outright, especially if you end up paying interest on your purchase. There is also the chance you will lose your rewards if your account ends up past due.