4 Smart tips to avoid falling into credit card debt trap
It is a fact that thousands of consumers get into credit card debt traps due to irresponsible financial behavior. According to a recent report, some of the consumers are carrying a debt burden of $150,000 on their shoulder. Read on to know about the 4 tips to avoid getting into a credit card debt trap.
Tips to avoid falling into credit card debt trap
Here are the 4 tips which can help you avoid getting into credit card debt trap:
1. Plan and follow a budget: Create a budget on your own or with the help of personal budgeting software and follow it. Make adjustments to your lifestyle as per your budget. Spend your credit cards according to your budget. Review your budget at the end of the month and re-organize it if necessary.
2. Secure a card with low interest rate: If the credit card issuer is charging an outrageous rate, then you can very well close the account. You can secure a card with moderate interest rate from another credit card company. However, you need to have good credit score to qualify for such a card.
3. Find out the promotional rate on balance transfer cards: Gather knowledge on the promotional rate on the balance transfer card. These cards come with a very low interest rate for around 6-12 months. Once this period is over, the interest rates on these cards will be doubled by the card company.
4. Never carry balance for a long time: Financial experts are of the opinion that it is best to not carry credit card balance for more than 180 days. This is because the compounding interest rates can generate a huge balance. Most of the times, it becomes very difficult for the consumers to pay off such a huge balance.
3 Signs to know you are falling into a debt trap
Here are the 3 warning signs to know that you are falling into a credit card debt trap gradually:
1. You are surely getting into a credit card debt trap when you are regularly borrowing money from friends to repay your bills. It shows that your income is not sufficient to cover your expenses, which means you have a high debt-to-income ratio.
2. If you are using credit cards to meet your necessary expenses, then there is a great possibility of getting into debt trap in the near future.
3. Have you exhausted your credit limit? Is your credit-utilization ratio is very high? If yes, then you are most likely to get into a credit card debt trap. Very soon, you’ll find yourself floating in a sea of debt without knowing how to get out of it. To avoid this situation, you should keep your credit-utilization ratio within 30%.
Finally, you have fallen into a credit card debt trap, then you need to find out solutions to get out of it. You’ll have to increase your income to pay off your debts. One good way to increase your cash-flow is to become a content writer. For example, you can write articles on finance for different websites. There are lots of companies which need articles on various financial topics from time to time. You can just write articles as per their requirements and make money at the comfort of your home. You can use this extra money to get out of debt trap sooner.
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