How to Avoid Credit Card Debt in 2019
by Lyle Daly | Jan. 8, 2019
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Once you get in credit card debt, it's a nightmare to get out. Here's how you can keep yourself completely free of credit card debt this year.
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If you've ever been in credit card debt, then you know how much of a burden it is. You need to figure out how much you can put towards that debt every month while leaving yourself money for other bills, and high interest rates just keep adding to what you owe.
It can wreck your finances and even your mental health from the stress of the situation. Fortunately, avoiding credit card debt is all a matter of building the right money habits.
The basics of avoiding credit card debt
To stay out of credit card debt, you need to pay your credit card bill in full every month. That means only using your credit card for purchases you could afford with the money in your bank account and not using it to give yourself a loan. If you can do this, you can reap all the cash back or travel rewards of the best credit cards, without any debt coming with it.
That sounds simple enough, but the allure of being able to buy on credit often leads people to overspending. After all, if it was easy to avoid credit card debt, the average American household wouldn't have $5,551 of it.
Why do some consumers avoid credit card debt entirely when others accumulate it by the thousands of dollars? There are a few things people do that make all the difference.
Know how much disposable income you have
Discretionary spending with credit cards gets people into a lot of trouble. When you know your card has a high credit limit and you won't need to pay off what you buy for 30 days or more, it's easy to say "I think I can afford this" without bothering to check.
Don't play guessing games with your money. Calculate how much disposable income you'll have each month after you pay for your basic necessities and make your savings and retirement contributions. Consider that disposable income as your limit for anything extra that you want to buy.
Build an emergency fund
Credit card debt doesn't always come from frivolous spending. Many times it's the result of expensive emergencies, such as medical bills or car repairs.
An emergency fund will keep you out of debt when these kinds of events happen (and they will happen at some point). If you don't have any money stashed away yet, start saving.
It still makes you wince to spend $800 at the auto shop, but it's a whole lot better to have that money saved than to see it on your credit card bill for the next six months.
Prepare for big expenses
Besides emergencies, you should also plan for any big expenses that you know you'll have at some point. These will depend on your age and lifestyle, but just about everyone has something to plan for, whether it's a vacation, a wedding, or putting new tires on your car.
The consumers who stay out of debt are the ones who think ahead with their saving. Instead of putting that annual summer trip on their credit card and paying for it with interest, they're stashing trip money away in a savings account several months in advance.
Don't make impulse buys
If you're not sure about buying something, there's a perfect solution -- just wait a day or two. Don't pressure yourself into doing it right then and there. Revisit it later after you've thought about whether you really want to spend the money.
I do this all the time, and I've never regretted taking my time on a purchase. I'll put items into my cart or a wish list and then check back later. Sometimes I make the purchase, sometimes I don't, and sometimes I buy less than what I had originally planned. The bottom line is that waiting has saved me from a lot of unnecessary purchases.
Hit unsubscribe
It's a consequence of living in the 21st century. You buy something online, and the next thing you know, the merchant is emailing you every week with incredible new sales featuring items suggested just for you.
You're better off either unsubscribing from these emails entirely or filtering them so you don't see them in your inbox each morning.
One sales email probably isn't going to rope you in, but the problem is that merchants send these out all the time. If you keep seeing them, it's more likely that one of those headlines is going to catch your eye.
Leading a debt-free life
When you look at consumers who don't end up in credit card debt, the primary reason for that is because they take a long-term view of their financial decisions. They don't spend money without considering the consequences, and they prepare for future expenses, both expected and unexpected.
Anyone can build the same habits if they're willing to work at it, which is why committing to a year free of credit card debt is such a smart decision. You're not just going to have one year without credit card debt -- those habits you build will help you avoid credit card debt for the rest of your life.
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About the Author
Lyle is a writer specializing in credit cards, travel rewards programs, and banking. His work has also appeared on MSN Money, USA Today, and Yahoo! Finance.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
