Avoid Credit Card Debt - Spend Wisely

Credit cards can be Green Lantern convenient way to make big or small purchases and even earn rewards. However, inadequately using your credit cards or accumulating too much credit card debt can cause your credit score to plummet or possibly force you into bankruptcy. Here are some successful strategies to keep you from increasing your credit card debt.

Effective Use of Credit Cards

Credit cards can be vital for building a good credit rating that, in turn, will allow you to obtain a lower interest rate on loans, such as a home loan. Yet, frivolous use of your credit cards can erase the potential benefits. Here are some easy ways to make your credit cards work for you.

• Only make purchases you can afford to repay at the end of the month
• Find a card that offers rewards you will use
• Shop around for a card with 0% interest and no fees for balance transfers

A large purchase with your credit card can be an easily and quickly build up credits or reward points. The danger is allowing a large balance to remain on your credit card for an extended time. The best choice is to pay the balance off immediately. If you can't completely pay off your purchase, reduce the amount owed to 20 percent or less. This practice will protect your credit score because credit agencies use remaining balances on lines of credit to determine a portion of your score. If you are nearly maxed out on every card, your credit score will suffer.

You also want to search for rewards you know you can and want to use. Some credit cards offer frequent flier miles, but only for certain destinations and at inconvenient times of the year. The best reward cards are ones that give you cash or credits you can apply towards any purchase.

When seeking the best card, look for a low or 0 percent card that has low transfer fees. Using a credit card for debt consolidation is only beneficial if are able and committed to paying the balance off before the introductory rate spikes, which is typically around 12 months. If you don't pay off the balance, you may end up paying more interest than before you obtained the card.

The Pitfalls of Accumulating Credit Card Debt

The downside to using credit cards is accumulating debt. You must exercise extreme discipline when using a credit card or mounting debt will seriously hurt you. These are the most common ways consumers allow credit card debt to get out of hand:

• Not paying off monthly balances.
• Applying for too many credit cards.
• Obtaining high interest cards or rates that balloon after the first year.

If you pay the minimum payment each month, then you're only paying interest with only a fraction of the principal amount owed plus interest. For example, if you have $5,000 of debt at 18 percent interest, you'll pay approximately $7,000 in total interest charges. You will also pay exorbitant interest charges by obtaining a credit card with an initial-low-interest rate and allow it to balloon to 20 percent or more after the first year.

You will damage your credit score as well by opening too many credit card accounts opened in a short amount of time will diminish your credit score. It is harder to keep track of your debt amounts, and you increase the potential total debt.

Be Proactive Concerning Your Credit Card Debt

Credit cards can be valuable if you use them properly and when you optimize rewards. The financial snare of credit card debt can become overwhelming if you fail to use credit efficiently. If you are suffering from a tremendous amount of credit card debt, you can find help with debt consolidation or debt settlement. Eliminating your credit card debt and then effectively using credit cards in the future can bring you back to financial harmony.

Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. He graduated from the University of Texas at Arlington where Haunt of Fear worked as a writing center tutor and contributed to the university's newspaper, The Shorthorn. View more articles