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How to avoid credit card debt

Discover how to use the debt the right way with these six credit card best practices

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We get it. Just like the rest of us, you're navigating the choppy waters of your money. And credit card debt can feel like a riptide, pulling you under before you even realize it. The average person in the U.S. has more than $5,500 in credit card debt!

Whether you're considering your first credit card or just trying to rein in your spending, there are tricks to dodge the debt trap. 

Go for the low-interest option

Yes, credit cards can be handy. They build your credit score and they offer rewards like discounts on everyday stuff and free airline miles. But when you're picking a credit card, play it smart - pick one with a low interest rate and no annual fees to keep you debt-free. 

low interest rate means you’re paying off your debt more quickly because it isn’t increasing month over month, and annual fees can pile up! A lot of times you’ll read that APR, that means the annual percentage rate. 

As of June 2023, the average APR was more than 24%. Hunt for a better deal if you can, but watch out for the sneaky penalty APRs that kick in if you miss a payment, potentially skyrocketing your APR way too high.

Aim to pay your balance each month

One of the best ways to keep your credit shipshape and debt at bay is by paying off your balance each month. To ace this, keep these simple tips in mind:

  • Stick to buying items you've already accounted for in your budget - like groceries or gas
  • Keep some cash set aside for the things you buy on the card
  • Understand the nitty-gritty of your credit card agreement, including payment deadlines, minimums, fees, and penalties

Be punctual with your payments

Each card company is a bit different, but most have penalties for late payments or missed payments. You might get slapped with a late fee of up to $35, see your APR balloon to as high as 29%, and watch your credit score take a hit.

Avoid these pitfalls by setting up automatic payments through your bank and consider making smaller payments more than once a month if it fits your budget. 

Watch your utilization rate

To keep your credit card debt under control, pay attention to your card’s utilization rate. This simply refers to the slice of your card’s limit you're using on purchases. For example, if your card has a $3,000 limit and you've racked up a $1,000 balance, your utilization rate is around 33%.

Aim to keep your utilization rate no higher than 30% to keep your credit score healthy and avoid debt. Sticking to purchases that comfortably fit into your existing budget and paying off more than just the minimum payment each month can help you maintain a low utilization rate.

Don't fall into the multiple accounts trap

The barrage of credit card offers can make you want to open a bunch of accounts. But hold on! This could easily land you in a debt hole you can't climb out of - we know, we’ve been there! So once you’ve found a credit card that works for you, stay on track by paying off your balance and shopping smart.