Thursday, January 2, 2014

Stay Free From Credit Card Debts

With a new year dawning, it’s time to establish a relatively clean start. Whether or not you have old credit card debts, it’s best to make a conscious decision to avoid accumulating new debts in 2014.

While some may argue that incurring credit card is unavoidable, a measure of self-control and discipline goes a long way in allowing you to maintain your finances in a manageable state. Here are a few ways in which you can stay debt free (relatively) this 2014:

1. Lessen Credit Card Use

This is a no-brainer. While a more obvious answer would be to not use your credit card at all, we all know that that is not a realistic course of action. After all, credit cards exist for a specific reason. What is realistic is controlling your credit card usage to avoid overspending. Use your card only when it is the only option available, and even then mentally weigh if using your credit card is actually necessary. Lessening your actual use of the card lessens any possible debt you might get.

2. Prepare for Emergencies

Set aside some money so you can have an emergency fund. By having money prepared for unforeseen events and expenditures, you can dip into that emergency fund instead of reaching for your credit card.

3. Charge Within Your Means

If you do need to use your credit card, then use it for transactions you know you can afford. Keep in mind how much you’re actually purchasing and be sure to pay for your credit card bill in a timely manner, avoiding penalties, and interest fees.

4. Always Pay in Full

Credit card debts accumulate when you constantly have a balance that’s carried over in the following months. Make sure you place yourself in a state wherein you can afford to pay your monthly bill in full in order to avoid being burdened by long-term debts. Always be aware of what you have to pay and manage your finances accordingly. Remember, huge debts sometimes begin with small but neglected debts.

5. Try to Avoid Taking Out Cash Advances

Cash advances are very convenient, and that is why credit cardholders have a tendency to overdo them. Remember that just because you have the option to take out a cash advance doesn’t mean that you have to take that option. A cash advance is simply you borrowing money, and that results—obviously—in debt. Work on your financial situation to ensure that taking out a cash advance will never be necessary. (The aforementioned emergency fund is a great way to do this.)

6. Be Careful With Who You Allow to Use the Card

Some people are in credit card debt because someone else overused their card. This is something you can avoid simply by either being careful with who you give access to your credit card account, or just by simply not allowing anyone else to use your card.

7. Understand Your Credit Card Account

Ignorance is never an excuse, particularly when it comes to money. When you sign up for a credit card, that’s a financial commitment, and it’s your responsibility to know every detail of every term and condition that financial commitment has. In order for you to not be straddled with credit card debt, it’s always best to know what you’re entitled to and what you’re responsible for. That way, you know which mistakes you cannot afford to make when it comes to your credit card usage.

All in all, just be responsible with your credit card use and credit card debt would be the least of your worries. By taking the initiative to avoid credit card debt in the coming year, you can ensure yourself a more financially stable 2014.

Note: This is a guest post by Money Hero,  a Hong Kong’s leading financial comparison website which helps its readers to compare a broad range of financial products online - from credit cards to insurance plans.


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