Credit Card Debt – How You Can Prevent It

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A few weeks ago, the Federal Reserve released a report stating Americans have the most outstanding revolving debt in history at $1.021 trillion. This substantial revolving debt consists mostly of credit card debt. According to the Federal Reserve, the annual growth rate of revolving credit is 4.9%. A reason for this growth is that consumers are getting access to more credit cards recently.

Credit cards can be a great way to build up your credit history, as long as you use them responsibly. Also, as long as you can avoid interest or late fees, you can maximize any rewards you get while you spend. On an individual level, there are easy ways to ensure you don’t become part of the national statistic and face your credit card debt.

Be Disciplined

If you are using a credit card, you should always stay disciplined not spend more than you can afford to pay off on time and in full. Consumers make the mistake of charging what they are unable to pay for with cash. But by paying your balance on time, you will avoid interest and late fees. A habit of responsible spending will ensure that you’re staying out of debt.

credit card debt

Create A Plan

This step is simple but impactful. Gain control of your credit card spending by taking a day to review your past purchases. Seeing all your expenses can determine which purchases are necessary and what you should avoid. Using your findings, it’ll be easier to design and stay within a budget every month.

Also, it’s a great idea to take the time to understand your credit card terms. This way, you’ll be aware of all the possible costs that your credit card issuer can make, which ultimately helps you understand how to use your card.

Avoid Cash Advances

If you’re thinking of borrowing cash from an ATM, think again! Acquiring cash on your credit card is a cash advance, which has high costs and can show your lender you’re irresponsible with money.

You’ll usually pay a fee on the cash advance or a percentage of a dollar amount, whichever is greater. The more expensive part, though, is the interest on the cash advance. Credit card companies start charging interest on cash advances immediately, unlike with purchases, which usually have a grace period. Also, the APR on cash advances is generally higher than average purchases on a credit card. A 25% APR on cash advances is not unusual. Save your money and avoid cash advances whenever you can.

Take Advantage of Intro APR Offers and Balance Transfers

Intro APR Offers

There is a selection of credit cards that offer a 0% introductory APR period for purchases you make. The period varies from card to card, some as low as six months or as high as 15 months. Over that time, you won’t pay any extra interest on the balance as long as you make your minimum payments.

If you’re planning a large purchase or spending a lot of money soon, these types of cards can help you avoid interest, instead of paying a purchase off over time on a card with a non-0% APR. Taking advantage of these offers will provide you with some extra time to pay off big purchases. You can usually earn rewards as you spend on these cards as well.

Keep in mind that you need to keep up with minimum payments each month, and should pay off the balance by the time your introductory APR finishes. Keep the balances on your cards as low as possible to keep your credit in good shape.

Balance Transfers

If you do happen to have any credit card debt, a balance transfer is a way to move the debt from one card to another with the end goal of saving interest. Usually, people who perform balance transfers will transfer debt from one card to another card with a lower or introductory 0% interest rate. Most cards, even those with an introductory interest rate of 0%, still tack on a fee to transfer the balance. The fee is typically between 2% and 5% of the total being transferred. Again, if you stay disciplined, you can avoid interest fees altogether!

Remember to use balance transfers responsibly. Come up with a plan to ensure that saves you money instead of costing more. For example, you decide to transfer a balance that is accruing interest to a 0% intro APR card. This 0% card gives you 12 months interest-free. Figure out how much each month that you need to pay to cover the complete balance before the 0% period ends. That way, you are not paying interest at all on the balance you’ve transferred.


It’s easy to get caught up in bad habits using a credit card. Many people end up with credit card debt after not realizing they were heading down a dangerous path. Examining your spending history can help you develop a spending budget to execute. Avoiding unnecessary fees by using your card responsibly will also help keep you out of debt.

Aim to use credit cards to your advantage. They can help maximize your spending by earning rewards and providing extra securities. 0% Intro APR offers will help you have extra time to pay off large purchases or expenditures. By following these basic tips, you can take advantage of your credit card rewards and avoid becoming part of the revolving debt statistic.

Editors Note: Our $109,000 worth of debt was all credit card debt. We used credit cards to inflation our lifestyle and lived beyond our means for years. When using credit cards, it’s important to understand your spending behavior. For some people, credit cards may not be a right fit even with tempting rewards or 0% interest rates.

8 thoughts on “Credit Card Debt – How You Can Prevent It”

  1. Hey, Brian. I was very dumb with credit cards until I was in my early 40s. I thought maintaining a balance was perfectly normal–and reasonable! I had no idea how much the 21% APR was eating into my ability to save and build wealth. My only saving grace was that I never missed a payment and I never went completely mashugana with my balance. I think the most credit card debt I ever had was a little over $7K. Great post as always, my friend. I hope young people are sensible enough to heed your advice. Cheers.

  2. “For some people, credit cards may not be a right fit even with tempting rewards or 0% interest rates.” I’m really glad you added this part, Brian. Every bit of advice in the post makes logical sense, but it doesn’t address the fact that for some people, logic won’t be enough to get them out of their bind. Some debtors need to avoid credit cards the way alcoholics need to avoid alcohol. “Just have one drink,” doesn’t work for alcoholics. “You should always stay disciplined not spend more than you can afford to pay off on time and in full,” doesn’t work for most chronic credit card debtors. A wake-up call is needed for many of us before wisdom and logic can sink in.

  3. Practically, an emergency situation can also trigger credit card debt. You might have a major car repair or medical expense, or sudden guests at your home for a reunion. You’ll be forced to use your cards to meet up these unplanned expenses. Having an emergency fund could help you avoid this situation by providing cash to use when an emergency arises. People who follow a cash-only budget plan may agree with me. By using envelop system they actually categorize every day-to-day expenses, along with a solid emergency fund.

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