What’s in your wallet? For most people the answer is “several credit cards.” Using plastic to pay for purchases is convenient, but it can also be a debt trap if you cannot pay the monthly balance due on your credit card. If you find yourself in this situation, it is time to learn about the ABCs of dealing with credit card debt.
A is for Avoidance
The best way to handle credit card debt is not to incur it. Millions of Americans do not adhere to this suggestion. According to Experian, the average U.S. credit card balance was $6,194 in 2019. The problem is that if the credit card holder does not pay his monthly bill, the balance due rolls over and a high interest rate is charged. Now the credit card holder owes even more.
The advice not to incur credit card debt does not mean you should not use a credit card; it merely means that you should use the credit card wisely. Aim to pay off the balance due each month so you do not begin to amass credit card debt.
Avoidance works best at the point of purchase. Ask yourself if the item you wish to buy is essential. If so, then ask yourself if you could pay cash for the item. If not, then using a credit card may be an acceptable choice.
Let’s say you are out of town, and you experience car trouble. In order to get home, you must replace the alternator. Is an alternator essential? Yes, because without it your car will not run and you will not have transportation. Can you pay cash for the alternator? No, because you do not have sufficient funds in your checking account to cover the repair. Tendering your credit card is the way to go.
If you already have credit card debt, avoid adding to it. Do not make any further charges to your card unless the item is essential and you have no other means to pay for it.
Read more on the next page to deal with your credit card debt.