Debt is a damp and nasty hole that is much easier to fall into than it is to crawl out of. When dealing with debt it is always best to avoid it all together. There are always options for those of you who are too lost in debt to get out, but they can be pricey and often can hurt your credit and ruin your chances to qualify for financing for homes, or cars. Here are a few common sense tips to help you stay out of debt and avoid all the stress that goes along with it.
Tip#1 You are paying for more than your purchases
When dealing with credit it is a simple and common misunderstanding that you can buy it now and pay for it later, this is not that case. What people do not understand is that you will be paying interest on everything you charge so even though it gives you the flexibility to pay for your purchases in smaller payments; be aware that you will likely be paying more in the long run for everything, even that large order of fries you charged yesterday. So it is important to understand that it is a little more complex than just getting something now and paying for it when it is more convenient for you.
Tip#2 Try to keep a balance around $0
Keep your balance at and around $0. This sounds crazy, I know. But it can really help your credit. Credit is a necessary evil. You need credit to purchase most of your large purchases and using credit raises your credit score. The best way to raise our credit is to use credit and then pay it back. As a rule of thumb you should keep your balance at what you can afford to pay off in the next few months. Carrying large balances can hurt your credit score, cost you more in interest, and make it much harder to pay off later.
Tip#3 Take Responsibility
This is important. The Credit business is a business. Like any other business they need to make money. One of the easiest ways for them to do this is with interest and other penalties. They aren’t necessarily an evil company; the truth is that your money and your credit are your responsibility. You agree to the terms and you are responsible for the interest and fees that you accumulate on your account. So make your payments on time and don’t over spend to avoid penalties. And keep you balance low and pay your debt off more quickly to avoid interest.
Tip#4 Limit Yourself
It is very important not to go credit crazy. Do not accept every credit limit increase offer or every credit card offer you receive. You can get a credit card from just about every store out there. But you need to remember to look at your debt as one big picture. Even just have a small balance on a few cards can add up. You need to be aware of your overall total and work to limit that.
I understand that these may sound like common sense but really managing your credit is not that difficult as long as you are conscious about how much you are spending and have a plan to pay it off. If you follow these tips you will cleverly avoid debt and be far more comfortable about handling your credit. Which after all is a vital part of today’s economy.