Everyone has heard the horror stories of credit card slip-ups snowballing into overwhelming debt and long term credit score damage. They are almost too convenient, and pulling out a credit card to pay for that “treat yourself” splurge is so easy and painless.
But those innocent purchases here and there can build up, and mounting interest rates can turn your manageable payments into a nightmare. While credit cards can help you build your credit score when used responsibly and sparingly, they are also easy to misuse.
You can follow these ideas to keep your credit cards from getting the best of you:
1 – Only Buy What You Can Afford
Remember that if you cannot pay with cash, you probably cannot actually afford it. When using cash or your debit card, you have an exact and finite amount of money that you know will only renew on payday. When you use cash, it is gone the moment you spend it.
There are no surprises a month later when a bill arrives like there are with credit cards. If you have to make a large purchase that you cannot afford all at once or with a single paycheck, put some money away every pay period until you can afford to pay cash.
2 – Start Small
If you want a credit card to build up credit with a lower risk of overspending, try just getting a store credit card. That way, you still have a card that reports your payment history to credit reporting bureaus, but you are less likely to spend more than the limit because you can only use it at one store.
Often store credit cards offer valuable incentives and perks for card holders, like special discounts and sale days, coupons, free gifts, or even extra shopping hours around the holidays. As long as you keep your balance paid off every month, this is a great way to save a few dollars as well.
3 – Travel Smart
When traveling internationally, it is often easier to put everything on a credit card than to try to calculate the exchange rate. But it is easy to let your spending get out of hand when you are are not actually looking at the actual amount of money you are paying. To make sure your spending does not exceed your budget, load an internationally accepted prepaid debit card, or use a remittance service to have money sent.
4 – Build An Emergency Fund
When an unforeseen expense pops up, like a hospital trip or car repair, it is tempting to just put it on a credit card and deal with the bill later. Stash away a percentage of your paycheck every pay period to help cover these expensive surprises.
Minimizing Credit Card Usage
Credit cards can be great to help you build credit and cover last minute emergency expenses in a pinch, they can make overspending far too easy. But roll compounding interest into the equation and you can end up with much more debt than you bargained on.
Stick to cash whenever possible, use cards that can only be used at certain places, prepay or transfer money while traveling, and start an emergency fund to avoid credit card bill sticker shock at the end of the month.