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Credit cards are a convenient way to pay for just about anything. From that new business tool you’ve been eyeing to the new roof over your home office your house so desperately needs, it’s easy to whip one out and pay for what you want. Unfortunately, as convenient as they are, credit cards can also be financially devastating for many people.
Because credit cards make acquiring new things very easy, using them again and again, even when you can’t afford to, is altogether too tempting. It doesn’t take long to accumulate a massive amount of unmanageable debt. To avoid this vicious cycle, we’ve put together a list of things you can do to escape the credit card debt trap.
1. Get a Loan
If you’ve already amassed a significant amount of credit card debt, your monthly finances are probably squeezed by ballooning repayments. This can drastically reduce the amount of disposable income remaining for life’s necessities, sending your hand back into your pocket to reach for that credit card once again. One way to end this cycle is to access fast cash loans online that cater to smaller loan sizes with far lower interest rates than most credit cards offer. A growing number of responsible lenders are offering such lifelines to individuals and families to help them achieve financial independence. This can be a great way to get yourself over a short-term cash-flow crisis without saddling yourself with more high-interest repayments than you can afford.
2. Leave Your Credit Cards at Home
If you don’t have your credit cards with you when you shop, you can’t use them. To avoid the temptation of buying something on credit you know you can’t afford, leave all your credit cards at home. Only bring them out for emergencies or when you have a solid plan in place for paying off a purchase.
3. Pay the Cards in Full Each Month
While most lending institutions bank on your not paying your credit cards off in full, the most effective strategy is to pay their balances off entirely each month. If your providers offer reward points, you’ll reap bonus rewards with payment in full each month because you won’t pay the high interest rates associated with most credit cards.
4. Start an Emergency Fund
When asked why they need credit cards, many people will reply that they only keep them “in case of emergency.” In the short-term, paying emergency costs such as car repairs or doctor bills with credit is most helpful. In the long-term, it only serves to put you further in debt.
You can eliminate your need for that emergency credit card by opening an emergency savings account that you draw from when things pop up instead of using a credit card. When you know you have a cushion in the bank to cover necessities like this, it’s much easier to plan and manage your finances without credit.
5. Only Keep One Credit Card
It’s very tempting to apply for multiple lines of credit, especially when your favorite store offers a discount if you use their card. Resist the lure to have more than one credit card to avoid having trouble paying them all when the bills come due.
6. Don’t Use Credit Cards at All
The easiest way to ensure you don’t succumb to the credit card debt trap is not to use credit cards at all. If you don’t have the funds available for something, then don’t buy it.
Credit cards are certainly convenient, but beyond that, they can cause financial trouble that’s difficult to get out of if you aren’t careful. Avoid the credit card debt trap by following the six tips above.