Conquering Credit Card Debt

To remain debt free, you will need to make drastic changes in how you use credit cards. Here is some advice on how to get and stay out of credit card debt.

• Have no more than two or three active credit card accounts. More than likely, you've had problems with credit card debt in the past. To avoid this temptation in the future, limit yourself to only two or three active cards. Having more accounts than this will not help you and may lead you into debt again. If you choose to become debt free through consolidation, limiting the number of accounts will be easier because your consolidation company will probably require you to cancel the cards you consolidate.
• Don't carry over your balance. If you must charge something to your credit card, do everything you can to ensure that the balance is paid off before you are charged interest. Carrying a balance over just one month is all it takes to end up back in a cycle of debt and worry.
• Create a rainy-day fund that contains three months' worth of living expenses. Once you curb your frivolous spending habits, emergency situations are usually the biggest debt pitfall that remains. Even consumers who have excellent self-control with credit cards can get into debt trouble when financial crises strike. As such, it's important to have a fallback other than credit cards. If you start now with the goal of saving enough to live for three months without borrowing, you might surprise yourself at the progress you'll make. As soon as your fund starts to grow, you can enjoy the peace of mind that comes with having an interest-free backup plan in the event of emergency.
• Make your cards inaccessible. Staying debt free will be an uphill battle if you constantly tote around your credit cards with you. When buying impulses strike, you can quickly reach for your card and charge the purchase without having to think twice. However, if you leave your cards at home when you go out, you will have to go to great pains to go home, retrieve the card, and come back to make the purchase. By the time you go through all of those steps, the temptation to buy the item will likely have subsided.
• For major purchases, consider other types of loans. For those large purchases that are absolutely necessary, you should consider a personal loan instead of using your credit cards. Ideally, you should save for the item and pay for it in cash rather than borrowing, but personal loans are the next best thing. Their interest rates and terms are much more reasonable than those of credit cards, making their balances easier and cheaper to pay off.
• Verify that you make more than you spend. If you stick to the rule that you do not spend more than you bring in every month, you should have no trouble remaining debt free. Remember that credit card spending still counts, even though you don't pay for the purchase at that moment. Run through your budget to double-check that your expenses are far less than your income. If you don't want to trim your expenses, you'll have to find a way to bring in more income.