How to avoid credit card debt? Here are 6 key tips

If not controlled, credit card debt can easily get out of hand. High interest rates, late payments, and unstated costs can negatively impact your financial well-being. Here are some doable tactics for preventing credit card debt and preserving your financial stability to help you stay on course.

Understanding credit cards

Using a credit card, you can also borrow money up to the established limit of your issuer. Like a revolving line of credit, you can spend some money and pay for that loan balance later on. Credit cards offer rewards and convenience and can also boost one's credit score when managed properly. On the other hand, misuse will land you in serious debt with financial stress.

Understanding credit card dues?

The amount you owe on your credit card and comprises of:

• Principal: This is the amount spent using the card.
• Interest: Charges on amount outstanding.
• Fees: Annual fees, fee for late payment and other charges.
• Late payments: It does not only lower your credit score but may also lead to legal repercussions because of raised interest rates.

Tips for avoiding credit card dues

1. Be cautious when using credit cards: Choose credit cards that suit your budget, have low interest rates, and little fees. If you're a novice in credit or you tend to overspend, start with a secured credit card or one with a low limit.

2. Budgeting: Establish a budget that is tailored to your income and expenses, monitor your spending to know where to look and cut wasteful spending. Put money aside for savings, needs, and debt paying to keep within your limit.

3. Establish good spending habits: Be able to differentiate between the needs and wants to prevent impulsive purchases. Delay in purchasing things that are non-essential. Save loads of money by looking at sales, weighing costs and coupons.

4. Build an emergency fund: Unexpected expenses precipitated by life's uncertainties may encourage the use of credit cards. Save three to six months of living expenses in a separate, easy-to-access account.

5. Pay more than the minimum due amount: It’s best to pay your full credit card bill by the due date. However, if you cannot do so because of financial constraints, always aim to pay more than the minimum due. Making additional payments helps reduce the principal amount faster and lowers the daily interest charges. It shortens the repayment period and can save you money in the long run. 

6. EMI-friendly: Ask your bank to convert your debt into EMIs if you cannot pay the full amount. Example, at times interest rates for EMIs are even lesser than that of revolving credit. You can even apply for a personal loan at a lower interest rate, but pay off the money borrowed against your credit card.

In conclusion, it requires self-restraint and fiscal discipline not to run into credit card debts. Use your credit wisely, keeping in view your budget and ensure that the payment is promptly made in time, while keeping track of your accounts and all other expenses with emergency saving. If you spend prudently, plan beforehand and take care while planning anything, you might keep all your finances safe and also away from loans.

(Note: Using a credit card carries its own set of risks)