This is a guest post on credit card use from financial blogger Mike Brains. Do YOU think credit cards are a good option to avoid debt? Tell us in the comments below.
3 Ways To Use A Credit Card To Avoid Debt
It might seem like an oxymoron – using a credit card to avoid debt. However, it’s not all bad news. Credit cards can offer options if you’re responsible and clever enough to take advantage of them. Avoiding debt in today’s economy is a difficult task at best, and we all need every tool at our disposal to help. Instead of allowing that little piece of plastic to lead us down the debt road, harness its power to pull us out. Yes, it can be done!
Credit cards are a fact of the modern life and have become very useful in today’s financial climate, but only if used carefully. Too many people apply for a credit card and instead of becoming intimately familiar with the accompanying credit card agreement and remembering credit cards are a loan and not “free money”, things can spiral out of control very quickly. The thing to keep in mind is to avoid debt. If you are already enmeshed in a debt quagmire, you need a different strategy.
Here are 3 ways to use a credit card to avoid debt:
1. Don’t purchase anything you cannot afford. A credit card can give you a huge edge on taking advantage of a great price on a big-ticket item, but if you can’t afford it in the first place, walk away. Miss a payment or fail to make the minimum payment at the end of your billing cycle, and you’re looking at steep interest rates and outrageous fees which will eat up any great savings you’re receiving. Buy it and use your credit card only if it’s a fabulous deal, only if you can afford it and only if you can pay it off on time.
2. Observe the limit. It’s not just the limits of your credit cards you should keep an eye on, but also how they affect your credit score. A good credit score is a defining factor in many aspects of your financial life. It can determine whether you get the house, the car, or at what rate. Keep your debt at least 30% below your credit limit. Potential loaners will look at your debt load and this will significantly impact your credit rating.
3. Choose carefully and choose wisely. The type of credit cards you choose should be made according to your lifestyle. The rewards and perks a credit card offers needs to evaluated carefully to determine if they are the best fit for you. For instance, if you travel a lot, then an air miles credit card may be worth considering. If you don’t travel then then rewards such as cashback credit cards might be your best option.
Make smart choices, make your payments on time, and keep your debt ceiling down. These are the best ways to avoid crushing debt while using credit cards.