How To Avoid Credit Card Debt

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Americans rely on credit cards a lot. Total US credit card debt amounts to $784 billion, while the average household carries $17,000 in combined balances. Given the median annual income for US households is about $59,000, the average individual credit card debt amounts to nearly one-third of annual earnings.


And the cost of living expenses doesn’t leave much room in a budget to pay off mounting credit card debt, leaving many to carry balances for years – with interest added.


To help you avoid the financial predicament so many Americans find themselves in these days, here are 7 tips on how to avoid credit card debt:


  1. Create a budget. The first defense against credit card debt is setting a realistic budget. Many people are living beyond their means simply because they aren’t fully aware of how they actually spend their cash, forcing them to use their credit cards to cover living expenses, such as groceries and housing.


  1. Don’t make purchases your budget can’t cover. Christmas may be just around the corner, but you should avoid buying presents that December’s budget cannot cover – true friends and family don’t care about gifts. Of course, this advice applies year-round. While you might not have the cash on-hand to make a purchase, you should be able to pay your credit card balance off at the end of each month. Which brings us to our next tip…


  1. Pay your balance off every month. Paying your credit card bill in full at the end of each month, or billing cycle, allows you to avoid interest charges – and, added bonus, helps you build your credit at no extra charge.


  1. Pay your credit card bill on time. Delayed payments are often followed by hefty late fees and may cause your credit card company to up your interest rate depending on your agreement. Not paying your bill on time will also hurt your credit score, potentially blocking you from low-interest loans and mortgages or employment opportunities.


  1. Monitor your accounts. It’s a good idea to keep track of your purchases to ensure you don’t overspend; however, monitoring your accounts can help prevent fraudulent activity from spiraling out of control. If you do end up discovering purchases you didn’t authorize, contact your credit card company immediately to protect yourself from liability.


  1. Don’t open multiple credit cards. Having more than one credit card can make it difficult to keep track of your purchases – and serve as a temptation to spend money you really don’t have.


  1. Create an emergency fund. Lots of people turn to credit cards in the face of emergencies, such as unexpected illnesses or necessary household repairs. To avoid the necessity of credit cards, you should incorporate savings into your budget the same way you would the electric bill or rent.


These tips are a great start to avoid unmanageable credit card balances. But what if you’re like most Americans and already owe more than you can handle? New Era Debt Solutions may be able to help you. New Era is a debt settlement company that helps people dramatically reduce their debt obligation to secure their financial independence. Since 1999, we have settled over $200 million in debt for our clients.


To see if debt settlement is right for you, contact us or fill out the form on this page for your free debt analysis.