Ditch the Debt Spiral: 5-Step Guide to Smart Credit Card Spending
We all know the dangers of credit card overspending. Debt, stress, and a damaged credit score can quickly become unwelcome companions. But how do you break free from that cycle and use your credit card responsibly? This simple and practical 5-step guide will equip you with the strategies you need to become a credit card master, not its victim. These are the 5 simple steps that I have been following since 2013 in my credit card journey.
1. Rewards? Earn Them, Don’t Chase Them:
Forget about maximizing rewards programs. Rewards should be a perk of your responsible spending, not the reason you spend in the first place. Resist the urge to reach arbitrary spending milestones on multiple cards – that’s a recipe for debt.
2. Master the Art of Full Repayment:
We all know paying your balance in full each month is ideal, but it can be tough. Fight the temptation to settle for the minimum payment. Remember, with a minimum payment, you’ll accrue interest not just on your existing balance, but also on any new charges!
3. The Secret Weapon:
Take charge! Firstly, find out what you can realistically afford to spend monthly. Moreover, all the banks allow you to set a card spending limit. Here’s the trick: set your limit at 80% of your affordable spending amount. This buffer prevents you from maxing out your card and creates a safety net.
4. Turn Purchases into Immediate Payments:
This is the ultimate way to avoid debt. Use your credit card for a purchase, then immediately repay it through your bank’s online bill pay system. This essentially treats your credit card like a debit card but with the potential benefit of earning rewards.
5. Don’t Compare Your Mileage:
Think of credit card rewards like mileage in a car. Everyone gets different results. Don’t be lured by flashy stories showcasing extravagant vacations redeemed with points. Just because someone else can fly first class with their rewards doesn’t mean you can (or should) try to replicate that lifestyle.
By following these steps, you can transform your credit card from a tool that tempts you to overspend into a responsible financial partner that helps you manage your money by rewarding you for your spending.
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Image Credit: Ken Teegardin from Boulder, Boulder, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons
