How to Stay Out of Credit Card Debt

6 tips to use a credit card wisely, stay out of debt, and build your credit score.

Laura Adams, MBA,
January 19, 2012

Podcast listener Jesse asks:

I just got my first credit card and need advice about the best way to use it so I don't get into financial trouble like many of my friends. What tips do you have?

Here are 6 tips to use a credit card wisely, stay out of debt, and build your credit score:

  1. Charge only what you can afford to pay each month. Having plastic in your wallet may seem like an invitation to overspend, but it doesn’t have to be. Millions of people use credit cards every day, but never pay a dime in interest or fees because they pay off their bill in full and on time every month.
  2. Track your credit card charges like a debit card. A trick to using credit cards responsibly is to deduct each charge from your account balance, as if you were making a purchase with a debit card. That keeps you from spending more than you have in the bank, but allows you to reap credit card rewards.
  3. Send more than one payment a month. Instead of making one payment to your credit card company when the bill arrives, send a payment every other week. This is really easy to do when you use online banking and bill pay. Check your credit card balance online and then initiate an e-payment from your bank account.
  4. Don’t spend more if your credit limit increases. If you’ve been a good customer, your credit card issuer will probably raise your credit limit over time. Never let an increased credit limit tempt you to spend more than you can afford to pay off right away.
  5. Use short-term credit strategically. When you finance a purchase—like electronics or furniture—with a credit card, make sure that you can repay it in full within a short time frame. The longer it takes you to pay it off, the more the purchase will cost you. For example, if you charge a $2,000 computer on a card with an 18% interest rate and pay it off in two months, the interest would cost about $60. But if you pay if off in two years, you’d pay almost $785 in interest!
  6. Make payments on time. Paying your credit card statement on time every month will help you build a good credit score over time. As your credit score increases, you'll qualify for new credit accounts at competitive interest rates and get favorable treatment from merchants like insurance and utility companies.

To learn more about building your credit score, download the Credit Score Survival Kit. This multimedia kit includes a video where I show you step by step how to get your free credit report. Plus, I tell you about my favorite place to get your credit score free, with no strings attached. Check it out:

Credit Score Survival Kit

********** Laura Adams is the award-winning author of Money Girl’s Smart Moves to Grow Rich. Get the paperback or ebook on Amazon.com! Click here to Download 2 Free book chapters!

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