Credit cards lure many consumers into financial difficulties, which is compounded by a struggling economy. Avoiding credit trouble allows individuals to live a comfortable lifestyle and alleviates the stress and worry that come with high credit card balances. Living within one's means is essential to avoid credit difficulties that can last for years.
Wants Versus Needs
Assess the difference between wants and needs. Avoid falling into the trap of needing the latest electronics, toys or other expenses. True needs include shelter, food, heat and clothing. Most other things fall under the "wants" category. Evaluate each purchase to determine whether you really need the item, or whether it is an item that you would simply like to own. Knowing the difference helps you avoid overspending. Set a monthly budget for the extras to ensure you don't buy too many of them, which may cause you to dip into the budget for necessities.
Pay Off Balance
Avoid keeping a balance on your credit cards. Pay off the balance each month if possible. This avoids lots of interest and prevents the balance from growing gradually to an amount you can't handle. Make it your priority to pay off any high balances on credit cards without taking on any new credit card debt. Ensure that you pay your credit card on time each month. Late payments result in fees and potentially higher interest rates. They may also be reported to credit agencies, which will lower your credit score.
Watch Small Purchases
Keep track of all of your spending, even the small purchases. Avoid the temptation to add extras to the shopping cart or buy little things that you don't need. Small dollar amounts add up quickly and eat away at the money set aside for necessities such as a mortgage or groceries. Excessive small purchases may lead to charging items on a credit card when money in the bank account runs low.
Read the Fine Print
Ensure that you understand all the details of a credit card before accepting and using it. Check on the interest rate, annual fee and other details of carrying a balance on the card. Avoid getting drawn in by promises of rewards for using the credit card. The rewards won't mean a lot if you get in over your head with credit card debt. Check your statement each month to ensure that all of the charges are legitimate. Keep an eye on the interest rate to ensure the company doesn't raise it. If the credit card doesn't have an annual fee associated with it, watch your statements to ensure the company doesn't charge you the fee.
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