How To Avoid Credit Card Debt

According to the 2011 reports published by CreditCards.com, nearly 609.8 million credit cards are held by US consumers. Credit card debt accounts for 98% of the total US revolving debt of $796.5 billion, as of November 2010. Moreover, the average credit card debt per US household is $16,007.

The ease of availability and sheer convenience of credit cards have changed our spending habits. However, credit cards can sometimes tempt you to over spend without foresight, which can lead to excessive debt.

Tips on Avoiding Credit Card Debt
Here are few tips that can help prevent credit card debt:

Choose the Right Credit Card: Thoroughly understand the terms and features of the card before taking it. Read through the agreement to understand how much interest will be applicable to your account and when the fee will be charged. It is preferable to choose a card with a reasonable interest rate. Stay away from cards with very high interest rates, high yearly membership fees and zero percent credit cards.

Have an Emergency Fund: Maintaining an emergency fund can help you to avoid credit card debt. Many individuals are forced to use their credit card because they don't have the cash to afford unexpected expenses, such as uncovered medical expenses, car repairs, home repairs and bank loan installments. This is where an emergency fund comes to the rescue. An emergency fund involves saving cash for emergency situations and periods of unemployment. The emergency fund savings should range from 3 months' to 1 year's living expenses.

Avoid Balance Transfers: It is preferable to keep your credit card balance transfers to a minimum. People often tend to transfer the balance of their existing credit card to a new one, to avoid a high interest rate. However, the difference in the annual fees and balance transfer fee can influence your savings. In case you still want to transfer your credit card balance to another card, use a balance transfer calculator to determine whether you will spend or save money by transferring the balance.

Limit the Number of Credit Cards: The more credit cards you own, the more are your chances of going into debt. It is preferable to have limited number of credits cards in your wallet to avoid tempting yourself with the large amount of available credit.

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