In 2013, credit cards are a necessary part of life, especially if you want to rebuild your credit and regain the trust of lenders after a bankruptcy. Avoiding debt with a credit card might sound counter intuitive, but it’s possible and it’s the key to reestablishing or improving your credit. Healthy credit card practices are a great predictor of financial health, but they’re often a pitfall for most people. By avoiding debt while using your credit card, you’ll build a stronger financial profile without having to worry about a mountain of debt to pay back.
5 Important Tips for Avoiding Debt
Avoiding debt with a credit card isn’t difficult as long as you employ strategies that are focused on your budget. By making purchases with your credit card that you can afford to pay with care, you’ll be able to handle your budget and avoid harmful debt.
1. Avoid cash advances. Many people take out cash advances so that they can pay everything in cash and better manage how much they spend. However, cash advances are actually more expensive because they have higher interest rates and transaction fees that accompany them.
2. Limit the number of credit cards. While opening a credit card is not harmful, having too many can make it difficult to keep track of payments and how much you’re spending. By limiting the number of credit cards you have, you can rest assured that you have enough credit for emergencies but don’t have to worry about keeping track of your spending.
3. Consider leaving the credit card at home. This will prevent the temptation of window shopping and spending money frivolously when you could have kept the card at home.
4. Keep a record of purchases. This will allow you to check for fraud when bills come in the mail. Furthermore, a record of purchases allows you to track your spending habits and make changes as needed.
5. Save, save, save! One of the most important elements of avoiding debt is having an emergency savings account. This should be different from retirement savings and similar accounts.