3 Simple Tips to Stay Out of Credit Card Debt for Good

Credit card debt is extremely expensive, with the average interest rate on credit cards coming in at 21.47%. 

If you're spending a fortune in interest because you're carrying a balance on your cards, you'll end up enriching large financial institutions -- all while making it harder to accomplish your own money goals. 

You most likely don't want to help a big bank CEO buy another private jet at the expense of your retirement, so you should follow these simple tips to stay out of credit card debt for good. 

1. Set up a budget to live within your means

If you are spending more money than you bring in, that's a surefire recipe to end up in credit card debt since you need some way to cover the extra costs you're incurring.

You'll have to make sure your spending is under control to be free of credit card debt, which means allocating your dollars to your purchases and savings while staying below the income you earn. 

You can make a detailed budget assigning every dollar a job, or a 50/30/20 budget keeping fixed costs to 50%, saving 20%, and spending the rest. Whatever approach you choose, the key is to make sure you can consistently live on your budget to ensure that anything you're putting on your credit card can be paid off in full out of your checking account when your statement comes.

2. Set up automatic payments for your cards

Next, set up automatic payments for your full balance from your bank. This way, you won't be tempted to ever just carry a balance for a little bit. You can have the money come out of your account automatically to pay your creditors in full, so you don't have to force yourself to always make the smart choice. 

You definitely want to be sure you don't overdraft your bank account by paying more out of your account to your credit card than you have in it. But if you're living on your budget and have kept your spending to the levels you determined were safe, this shouldn't be an issue.  

3. Maintain an emergency fund 

Finally, the last step to staying out of credit card debt for good is to make sure you have an emergency fund. This should be a fund with about three to six months of living expenses in a high-yield savings account. 

This is important because many people turn to their credit cards when surprise costs come up -- and then they find themselves in credit card debt. If you have money saved for emergencies, you won't have to worry about this. You can rely on those funds to pay for your surprise expenses and keep the spending on your credit card to the limits you set in your budget. This way, you won't charge more than you can pay back.

By following these three simple steps, you can stay out of credit card debt for good and end up in a much better financial position, since your hard-earned cash won't be going to cover interest.