Monday, March 29, 2010

Tips To Avoid Credit Card Debt

Regardless of your reason, getting a credit card opens your world up to a large number of temptations - many of which should be avoided to stop you falling in a black hole of credit card debt.

What steps can you take to ensure you avoid credit card debt, and what should you be aware of when signing up for a credit card?

First and foremost it's important to make sure the the card you apply for is within a limit that, if you max the card out, you'll be able to afford repayments on it. Having a credit card with an enormous limit may look appealing, but it's no fun when that limit has been reached and you have to repay it.

Regardless of the initial limit of your card, once it's reached banks will often offer you a credit card increase. This can be tempting, particularly if there's something you want to buy but haven't been able to afford. If you decide to increase the limit, again make sure that you'll be able to afford the maximum repayments. This is one of the biggest traps people fall into with credit cards, and can cause years of hardship as you repay hefty debts.

A closely watched credit card limit is just the first of many ways to keep your credit card under control. The hardest aspect of having a credit card is the belief that you have money which you actually don't have. It can be very tempting to pull out the credit card for those purchases which you would otherwise save for or put on lay by.

This belief that credit is cash is one of the many factors which has attributed to the current global financial crisis, and the big learning that should be taken away is not to spend money you don't have. Most purchases can be lay-byed, and if something can't be put on lay by then it's important to ask that question - do you really need it?

Reading through this list of precautions it's pretty obvious that the most important factor to keep in mind with your credit card is not to spend money you don't have. This seems like a pretty obvious rule to live by but temptations, particularly temptations that come in the form of shiny new objects, can be hard to resist when you have a brand new credit card in your hand.

So each time you go to make that purchase, pause for a minute and ask yourself first of all "do I have the money?" and secondly "do I actually need the item". If the answer to even one of these questions is no, then you should be putting the credit card away for now.

Finally, and perhaps most importantly, is to make sure you compare credit cards properly before you actually apply for one. Many different cards have different interest free periods, and interest rates. Low interest rates can go a long way towards paying off credit cards should you accidentally rack up a high credit card bill.

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