Credit Cards for Beginners: Tips to Avoid Debt

Credit card debt is the most common debt today. Millions of people depend on credit cards to finances different parts of their life. It’s common practice and acceptable to many, it’s not a wise practice for anyone to have. It has become common practice and acceptable because most people don’t know they shouldn’t do it.

Before anyone decides to get a credit card, they should know there are appropriate ways to use these cards. By using these cards appropriately and wisely, credit card debt won’t be an overwhelming issue. Not only will using credit cards appropriately avoid debt, it will help people achieve and maintain an excellent credit score.

Little Tips. Big Impact.

Credit cards are plastic loans. People that don’t understand that are doomed to a shocking lesson. Any amount of money that is charged to a credit card has to be repaid with interest. This is one of the basic concepts that is overlooked or not discussed. Without understanding this very basic concept, accumulating debt will happen faster than expected.

Set YOUR Limit: Every credit card has a limit that should be respected. Instead of allowing that debt to be the one that is used, everyone should set a limit on their credit cards that is manageable for them. If a card has a $10,000 limit, it’s not wise to go on a shopping spree and use the entire $10,000 available. The limit that should be set should ideally be set at less than 50% of the available credit available. By using less than 50% available on a credit card, the payments will manageable, less interest is accrued and the reports to credit agencies will be favorable.

By setting a limit that is less than 50% of a credit card’s available limit will also reflect a good utilization ratio on credit reports. When people apply for car loans and other financial applications, most major financiers look at the credit available and how much is being used. Those that aren’t using all their available credit has a greater chance of approval than those that are using all their available credit and still want more.

Pay the Balance Monthly: When a credit card is used, there will be a payment due the next month. Instead of paying the minimum balance, credit card holders should try to pay the balance in full each month. By paying the balance in full each month, less interest is paid on the money charged, debt is avoided and credit scores continue to rise.

For those that have charged a larger amount than they can pay off in one month, doubling the minimum monthly payment is also a great plan. By doubling the amount of money paid monthly in these circumstances, the amount of interest paid on the charges will be lessened and there won’t be a negative effect on credit reports.

It’s intoxicating to get a credit card for the first time. It’s a temptation for millions to use their credit card for frivolous purchases but it’s not the best use for a credit card. Those that remember they will have to pay the bill will be less tempted to be irresponsible. A credit card bill can be paid with on time monthly payments or with huge amounts of interest, a ruined financial reputation and an unstable financial future.

Choosing to be responsible with a credit card is an easy choice to make.

May. 8 14'

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