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Debt Management

Take easy precautions to avoid credit cards pitfalls

Summary

Find debt prevention tips that will keep you stay in control of your credit cards.

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While careless use of a credit card can leave you in debt, approaching your credit cards with a dose of common sense will ensure this doesn’t happen.  By taking some relatively easy precautions, your credit card will always be a helpful tool.

Having a wallet full of plastic can make it tough to keep track of how much you owe on each — which can spell trouble when it is time to pay your statements.  Therefore, try to keep your plastic at a manageable level.  For some consumers, that may mean only carrying one of two credit cards.

But just because you scale back on your credit cards doesn’t mean you should go ahead and cancel all your excess plastic.  For one thing, canceling numerous credit cards all at once may result in a drop in your credit score.  This is because the total balance across your credit cards will increase to a higher percentage of your overall credit limit when you have fewer cards.

Additionally, by holding on to credit cards you have had for a while, you will maintain your credit history.  So instead of getting rid of your rarely-used cards, dust off older credit cards and use them occasionally to keep the accounts active.

Meanwhile, many credit card users end up in debt trouble when they revolve a balance from month to month, allowing interest charges to accumulate.  Other consumers end up having to pay late fees when they neglect to get a payment in on time or when their check gets tied up in the mail.

Instead, opt to have the balance on each credit card paid by the due date using an electronic funds transfer from your checking account.  In addition to helping you avoid late fees, the knowledge that whatever you spend is coming out of your bank account can be a sharp reminder to keep spending in check.

Visit the credit card issuing bank’s website to set up an electronic funds transfer.  You can get help with this by calling the bank’s customer service number printed on the back of your credit card, as well as on statements.

Sometimes, consumers may revolve a balance on their credit card because they do not have enough money to pay their entire bill at the end of each month.  To prevent yourself from spending more than you can afford, record the amount of every credit card transaction in your checkbook.

By following these steps, you will avoid the pitfalls many consumers fall into when they use credit cards recklessly.  If you use a reward credit card or cash back credit card, your careful spending will actually help you come out ahead.

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Published: November 2, 2006

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