4 Smart Ways to Avoid Going Deep in Credit Card Debt

It may not be out of place to assume you already know a lot about credit cards. Who doesn't anyway? Certainly not with the avalanche of solicitations we get everyday from credit card companies and their agents asking us to own one of their cards or the other.

They will offer you the chance to run balance on your card, but will not disclose the burdensome interest rates you will be saddled with. As they encourage you to use their cards and indulge in wanton spending habit, you will unknowingly be gradually piling up debts. And before you know it, your credit card debts have climbed into tens or hundreds of thousands of dollars.

The situation has even gone worse now with the explosion of online shopping, which is powered by credit card usage. The implication of this is that lots of people are falling to professionally written sales letters, which they are exposed to online, and pulling out their credit cards before thinking, to make purchases they don't really need. And then go deeper and deeper into debt at alarming rate.

It may not be possible not to use credit cards at all, but you really have to watch it, else you will soon find yourself swimming in serious debt. Here are four ways to keep your credit card usage under control and avoid getting into huge debt you may not be able to pay off:

1. Make Use Of Frequent-flier Promotions tied to Credit Cards

If you are frequently flying, you can take advantage of frequent-flier promotions that are tied to credit cards, where you gain a dollar per mile traveled. Over time, the distance you have traveled may build up to the point of getting you a free ticket, and this saves you some money.

However, you have to be careful not to allow your balance on the card to build up so much, because if it does, the interest you will be paying on it may actually become more than the value of the "free" ticket, and you will be going very deep into debt.

Let me explain further. Assuming you ran a balance of $25,000 on your credit card. This will hang $4,500 yearly interest payment on your neck (supposing the interest rate is 18% per annum). Can you now see how the interest payment on the card has swallowed up the supposed "free flight ticket" the promotion promised and landing you in serious debt?

2. Examine Credit Card Offers Critically before Taking A Jump

You have to critically examine the offers you get from credit card companies before you take them because though they may look very appealing; underneath them are usually traps to get you into paying huge charges eventually.

For instance, you might be given an interest rate as low as 2.99% or 3.99%, but they will not tell you it would only last for a few months. This is just to bring you in, and before you know it, you are paying large rates and struggling with debt.

Other catches which credit card companies usually use to get you paying high charges include sanctioning you for making payment late. Even if it's only a day late that your payment came that will just be an opportunity for them to shoot their rate above the roof.

Also, be sure to check if the offer deducts charges for going beyond your credit limit or for closing your account. You should equally check if it requires you to pay an annual fee.

3. Watch Out For Grace-period Tricks

Some credit card companies will say they give you a number of days, say 20 days grace-period, to pay your bill in full and you will not be charged any interest. But be warned, many of them don't honor it. This is just a trick to get you in; they will start charging you before the so called grace-period is reached.

Therefore, ensure you pay up your bills in full as at when due, instead of waiting to use a grace-period, which may not be honored, and avoid going deep in credit card debt.

4. Cancel Any Card No Longer In Use

It is very important that you cancel any card you no longer use. This is because it will continue to be charged for recurring payments you signed up for earlier, but no longing using, which you didn't close properly. There may be other charges on the card for holding it, and all these widen your debt.

And this will reflect in your credit reports, and may hinder you from getting some financing you really need, such as a home mortgage. Many lenders will not be quick to issue you loan seeing your accumulative credit card limit running into as much as
$100,000.