How To Use Your Credit Card Without Landing In Debt

How To Use Your Credit Card Without Landing In DebtIt seems like using your credit card without landing in debt is impossible, right? After all, you will use the money of the creditor to make the purchase. Naturally, you have to repay that money. In essence, that is how debt works. When you borrow money and pay it back in the future, that is technically the very definition of debt.

However, there is one crucial detail that will help keep it from really being a debt. That is the interest rate. You see, if you can pay off the credit purchase before the grace period expires, you do not have to pay the debt with interest. Whatever you purchased, you will pay the same amount – it is just like you are delaying the cash payment.

If you fail to pay it within the grace period, you have to pay more for that purchase – because of the interest rate. That extra money makes it a debt.

Using a credit card is the norm in the US. It makes purchases very convenient. But that does not mean we should abuse it. Credit cards can easily accumulate and after that, it becomes a very toxic type of debt. And right now, credit card debt has risen. Americans have embraced the use of credit cards once more after the Great Recession. If you keep on abusing the use of credit cards, it could spiral out of control and lead to another problem.

Does that mean we should forget about using it? Not exactly. As long as you can manage the use of your credit card, you should not have a problem. If you know how to control it, then you do not have to fear anything. There are ways for you to use this purchasing tool without it leading you to financial problems.

Tips to use your credit card without incurring debt

The thing is, it is hard for our society to stop using credit cards. It is just like car ownership. The truth is, you do not really need it. But it makes your life so convenient that we end up buying at least one car. Sometimes, we buy it before we buy our own house.

The same is true for credit cards. We do not really need it because we can always use cash to pay for our purchases. But using this tool can be so convenient. It can also protect our cash from being stolen. When your card is stolen, you can simply call the creditor to inform them of the theft. This will keep the thief from using the card themselves.

We have grown so accustomed to the use of these cards that 17% of cardholders use it for small purchases – even $5 or less. The truth is, our reliance on these cards is not the problem. It is how we pay it off that will define if it can be destructive for us or not.

Fortunately, implementing the right habits will keep credit cards from destroying our finances. Here are tips that will enable you to use your credit card without landing in debt.

Always pay the balance in full.

If you have to use your card, make sure you can control how much you will spend on it. Do not think it is an extension of your wallet. Spend only what you think you can afford. To determine the amount, you have to include it in your budget. For instance, commit to use it only for groceries and make sure you only spend based on what is in your food budget. That way, you have the cash to pay off the balance in full at the end of the month.

Avoid using it for impulsive purchases.

This is a recipe for disaster. Impulsive purchases are not included in your budget. That means you cannot guarantee that you can pay this off in full at the end of the month. Unless you are sure that you have one expense in your budget that you can sacrifice, do not use it to satisfy your impulse buying tendencies. Unless it is a matter of life or death, pay for impulsive purchases with cash.

Save up for an emergency fund.

Sometimes, you make all the right choices when it comes to your money. But without an emergency fund, you will be tempted to use your card to pay for unexpected expenses – like a trip to the ER. When given a choice between life with debt or death, you will definitely choose debt as long as it means you can live longer. Of course when you will not feel the same way once you start paying off the credit card balance. So to avoid this, just save up for an emergency fund.

Do not skip credit card payments.

Another thing that you need to do is to make sure that you do not miss a credit card payment. Doing so will incur a late penalty charge. This is an unnecessary expense that you want to avoid. If you are forgetful, set up reminders that will alert you if a payment is due. Give yourself a couple of days for the heads up. That way, if you suddenly find your finances lacking, you can find a way to get the funds that you need. You can also call your creditors and lenders and ask them if you can move your due date. You can combine all your due dates to fall on one date each month. Or you can time them right after a paycheck arrives. That way, your finances are still high when you have to pay your debts.

While it is okay to keep on using your credit cards, you have to make sure that you will not end up relying on it too much. Becoming a credit card addicts is the first sign that you are on your way towards financial ruin.

Know the terms and conditions.

All credit card accounts have terms and conditions. It is important for you to get to know this because it will tell you the factors that can lead you to pay unnecessary charges and fees. You will also get to know your rights as a credit card user and what the creditor can do to the account without your authorization. All of these are important details that you need to know.

Keep only a few cards.

Do not get another credit card if you know that you will not use it anyway. Besides, when you limit the cards that you own, that will reduce the temptation to spend them. After all, it is possible for you to think of your cards as an extension of your wallet – which is the very mindset that can put you in debt. So to help control yourself, just stay away from the temptation.

If you follow all of these you should be able to keep using your credit cards without worrying about landing in debt. In the end, your knowledge of proper credit card management will help you stay away from credit troubles.

Using your credit cards to your advantage

While some people may think that using credit cards for purchases is a bad thing, you need to realize that there are ways for you to use it to improve your financial standing. Instead of letting our credit card spending get the best of us, use it to your advantage. Here are some of the ways to do this.

Use it to build your credit score

It is a known fact that you can use your cards to build a good credit score. This number is very important because it can open financial opportunities that are only possible if you have a good score. For instance, you can borrow a loan with a low-interest rate. A high score means you can be trusted to pay back your debt. But what is a good score? According to reports, the average national FICO score is already 700. That should be a good benchmark.

Use it to avail of rewards and freebies

Most credit cards come with a rewards or loyalty point system. That means, the more you use the card, the more freebies and rewards you can get. Take advantage of this for extra savings. Of course, you still have to make sure you use the card only as needed – and not to meet a certain reward or something.

Use it for additional financial security

Finally, you can use your credit card to make your finances more secure. While you still need to build an emergency fund, you can keep your credit cards just in case your fund runs out. That is not impossible to happen. If you end up having one unfortunate event after the other, you could deplete your reserve fund. Having a card on hand can help get you out of a life or death situation. Just make sure that you use it as a last resort.