Credit cards are a powerful tool that can make or break your financial stability. They are a reliable and convenient payment option for making purchases, but many fail to use them wisely and end up in debt. The most common reason for this is that they spend more than they earn or can afford.
Credit cards are a rewarding and dependable financial tool if used correctly. Here are seven tips to effectively manage your credit card expenses and stay away from debt. Pay your credit card bill in full The first and most important thing to do if you want to avoid your due balance from piling up is to start paying your credit card bills in full. Only swipe your credit card when you need to, and avoid the circle of debt by making full payments as credit card companies charge exorbitant amounts on unpaid expenses. You can also set balance alert notifications for when your expenses reach a certain amount. Make timely payments You can cut down on the total costs of keeping a credit card simply by making timely payments, as it helps you avoid late charges and penalties. Some companies charge about $40 for late payment, so you can save quite a lot over time. Additionally, your payment history impacts your credit score, so clearing your credit card bill on time can help you maintain or even improve it. You can set reminders on your phone or mark the due date in your calendar. Alternatively, you can set up auto-pay to ensure that you never fall behind on clearing your dues. Set an expense budget An extensive line of credit can tempt you to spend more, but this is a sure-shot way to end up in debt. Instead, set fixed budgets every month and stick to them. On average, it's best to use less than 30 percent of your total credit limit. This will boost your credit score as it reflects a low utilization ratio, makes your expenses manageable, and increases the chances of extended credit line approvals. Use spending analysis tools Credit card companies offer spending analysis tools that help determine the areas where you've spent the most. All you need to do is pick a specific period, and the tool will show you the categories wherein you've made the most expenses. Such analysis tools are an excellent way to identify and cut back on unnecessary expenses. Do not use cash advances Most credit cards allow users to withdraw cash from an ATM, but they charge an extremely high interest rate on cash advances. Stay away from using this feature unless there is a dire emergency. Cash advances have an average APR of about 25 percent, applicable immediately after withdrawal. Additionally, they come with a 10 percent or $5 flat-rate fee. So, if you withdraw $100, you will be liable to repay around $135. Amplify your credit rewards Credit card merchants offer many types of rewards. The two main types are a flat reward rate on all spendings and fluctuating rewards on certain categories of spendings. It is important to choose a card that offers you rewards in categories that align with your top expenses. For instance, if you often use your credit card to buy groceries, you should ensure that the merchant offers good rewards for spendings in that category. You can go for a flat-rate reward card if your expenses are varied. Take advantage of zero percent introductory APR promo Along with reward points and bonuses, some credit card companies offer zero percent introductory APR. This means you can pay your expenses anytime during the introductory period without being charged a penalty or interest. This offer is rolled out for a limited time and is applicable for purchases or balance transfers or, in some cases, both. That said, ensure that you clear the entire credit line before the zero percent APR promo period ends. This period can come in handy if you're consolidating debt from other high-interest cards or planning to make a large expense.