15 Key Rules for Using Credit Cards Without Accumulating Debt

If used correctly, credit cards can be a valuable addition to our financial portfolio. The danger is that they can be misused, and the interest charges outweigh the benefits.

In worst-case scenarios, users may accumulate debt that spirals out of control, so specific golden rules must be followed.

1. Pay by the Correct Date

It’s the first and arguably the most important rule of using credit cards. Each comes with a monthly payment date, and extra interest and fees are applied if the cutoff point gets missed. If you are concerned that you won’t remember when to pay, the best way to address this is to set up direct debits and let your bank take care of matters automatically.

2. Pay Above the Minimum

Financial experts advise paying off credit cards in full, but that’s not possible for all households. If clearance isn’t an option, advisors recommend that consumers pay more than the minimum amount due. Meeting minimum credit card payments will increase interest, and clearing the balance will take much longer.

3. Clear Your Most Costly Balances First

Those with multiple cards should focus on which one costs them the most. It will usually be the card with the most considerable balance, but it depends on the interest rates and whether they differ between providers. Do your sums and concentrate on the most costly cards.

4. Consider 0% Balance Transfers

Credit card providers will often list promotions to build their customer base. Zero percent transfers are widespread, allowing users to switch from their existing provider to save some interest. There will likely be a fee, but this can save money in the long term.

5. Be Aware of Promotional Periods

Remember when the offer expires if you take up a 0% balance transfer or any other promotional deal. When the time is up, the card will revert to regular terms, including the higher interest rate. Make that diary entry, and look for alternative promotions before the offer ends.

6. Look For Cashback Cards

We all want a little extra from our financial providers, and it can be a good idea to look for cashback credit cards. These products will pay a small percentage of your spending and be refunded through vouchers or cash. If you apply for a cashback credit card, you must clear the balance each month, or the interest will outstrip any benefits.

7. Use Credit Cards as a Budgeting Tool

If you are in a position where you can clear your credit cards each month, they are a helpful budgeting tool. By making all your purchases on the card, you can compare your budget plan and identify any areas where you have overspent. It’s a helpful option if you are sure you can clear the balance, and it can help guard against future debt.

8. Check Your Statement

Mistakes are rare in this digital age, but you should check your statement carefully. Aside from possible errors, your provider may have missed any attempts at fraudulent entries. Canceled subscriptions may also appear, so remember to play it safe and check every detail.

9. Keep Receipts

To back up any contested entry, you’ll need to have proof. Keep your monthly shopping receipts, and ensure they tally with your statements. For those canceled subscriptions, keep any emails or other related communications.

10. Only Buy What You Need

It sounds like a lecture, but please do not use credit cards for luxury purchases. Your savings account is where to head for annual vacations, new cars, and similar purchases. Even small luxuries can add up and add to unwanted debt. As a simple rule, ask whether you need the product or service. If the answer is “no,” don’t use your credit card to pay for it.

11. Avoid Annual Fees

There should be no reason to take up a card that charges annual fees. These are more common in cases where individuals have poor credit, but they can still be avoided. Unnecessary charges can contribute to mounting debt, but all consumers would be wise to overlook providers who apply those annual fees.

12. Close Unnecessary Accounts

Having too many credit cards will harm your credit score. This type of situation can also lead to temptation in terms of making unnecessary purchases. Keep temptation away and only keep the credit cards essential to your spending.

13. Follow the 15% Rule.

Those financial experts also advise that, at most, 15% of your household income should be spent on credit cards or personal loans. If your outlay exceeds this level, it’s time to seek external advice.

14. Stay Under 30% Of Your Total Balance.

The 30% rule applies to credit scores but is another helpful way to keep up with credit card debt. If, for example, you have a card with a $10,000 limit, you should maintain a balance below $3,000. Consumers should address any debt above that level, and help is available.

15. Seek Help When It’s Needed

If you’ve been unable to stop credit card debt from getting out of control, you don’t have to face the issue alone. Independent debt-help charities and organizations offer practical advice on the next steps. Many avenues are available, so please seek help when you need it.