(This is a guest article by Kris Bickell*)
If you've ever used a credit card, you know how easy it is for the balance to grow REALLY big, REALLY fast. And like a ball rolling down a hill, once it starts rolling ... well, once it starts rolling it's a lot easier to wait until it stops rather than chasing it down the hill.
So, think of credit cards like the ball.
And hold onto them tightly. Because once you start building debt, it's a lot like the rolling ball.
I know, that's much easier said than done. For most people, by the time you figure out you've got a debt problem, you've got a HUGE debt problem!
Trust me, huge debt problems don't go away quickly. Or easily. So do yourself a really big favor. And don't get stuck in the "debt trap" in the first place. One of my friends used to say "Money doesn't come with instructions". Which is so true. And even more true with credit cards. You get all the fine print about terms, rights, penalties, privacy policies. But nothing that tells you "don't charge more than you can pay off when the bill comes!"
I got my first credit card when I was in college. Imagine that!
I had no income. No credit. And no idea how to use it.
Yet American Express thought it was a good idea to give me a card anyway. Why? So they could make money off me, of course. Fortunately, American Express cards must be paid off each month. But the cycle of debt was started when I was only 20.
I remember my friends went on a day trip to Atlantic City and called me to tell me how much they missed me, because there were machines that took credit cards and gave you cash (of course, they didn't really miss me - they just wanted my fancy new AMEX card to use to get cash!)
The moral of the story is that the whole business of credit cards is nothing more than a money machine - for the banks!
So here are those instructions mom and dad never gave you. And American Express never gave you (or CitiBank or Chase or Capitol One, etc.) Here are 5 ways to avoid getting stuck in the credit card debt trap:
1) Don't fall for the lure of rewards cards (unless you can pay off the debt every month):
Rewards cards sound great. And if you can pay off the balances, they are. But if not, you'll probably end up paying a LOT more in interest than you gain in store discounts, frequent flyer miles, or other rewards.
2) Don't keep transferring balance & getting more cards:
Sure, credit card "surfing" is very common - constantly shifting your debt to low interest promotional offers. But in the long run, it's easy just to dig yourself a deeper hole, as you keep getting more and more credit. Want to use this as a temporary "quick fix"? OK. But as a long term strategy, this is like throwing the ball down the hill.
3) If you have more than one card, hide it:
It is tempting to use a retail card to save an extra 5% or 10% on purchases. Or use the new fancy looking card you just got in the mail. Or use the one with the lowest interest rate. And if you can pay it off when the bill comes, OK - then feel free to use them. But if you do fall victim to the temptation often enough, before you know it your credit card ball will start rolling down the hill!
4) Take yourself off the offers list:
The best way to keep yourself from getting caught up in the credit card trap is to keep yourself from getting all the tempting offers in the first place. So go to www.optoutprescreen.com and www.dmachoice.org to get your name off the most common mailing lists!
5) Don't use your credit cards as a spending account:
Make sure to set up a savings account to use for emergencies. Then, when you need some immediate cash, you can use this money instead of a credit card.
So there you have it. Sounds so simple, doesn't it? Sure, it takes some discipline. And many of your friends and family won't understand why you don't rely on credit cards to pay for everything. But if you follow them, these five steps will keep you out of the credit card debt trap!
*About the author: This is a guest article by Kris Bickell. If you would like to learn more about avoiding the credit card debt trap, visit www.Debt-Tips.com. You'll learn how the author, Kris Bickell, paid off all of his credit card debt and the various debt relief options you can use to improve your financial problems.
*Image Credit: Photograph by Leonid V. Kruzhkov [via Flickr Creative Commons]