Credit cards can be a blessing in your times of need. These plastic cards are easy to avail and can provide interest-free credit for a full month. They are quite handy when you want to buy something beyond your means or pay for your emergencies. No wonder, that most Americans possess more than one credit card today.

However, credit cards can put you under debt if you are not judicious with their usage. Given how easy they are to use, you may lose track of your spending and go overboard. The interest on outstanding credit card bills is pretty high. Your bills can inflate to exorbitant levels if you do not pay them on time. To give you an idea, Americans owed $870 billion of credit card debt in the last quarter of 2018.

If you have ever been in this situation, you will know what I am talking about. Once you have cleared all your credit card bills, you will never want to fall into this pit again. Here is a list that will keep you away from a similar situation in the future.

Prepare your financial goals

Having goals can give you several benefits. For starters, they motivate you to do better in life. Nothing can drive you better than your passions. Similarly, financial goals are a must if you want to secure your future. These goals may include items like buying a house, saving for retirement or your children’s education. If you do not have these goals, you may continue spending on meaningless items. The urge to fulfil your financial goals will also inculcate savings behaviour and prevent you from piling any debt.

Create an emergency fund

Emergencies can strike anywhere at any time. We live in unpredictable times and there is barely any job security. Besides, medical emergencies can come unannounced in the family and without insurance, it can take a toll on your finances. It is advisable to put aside at least three month’s salary in an emergency fund. This amount will protect you during your testing times and you won’t have to rely on credit cards. You may put aside this money in a separate bank account to ensure that you don’t touch them for your regular needs.

Use credit cards wisely

If you have struggled hard to clear your credit card debt, you may never want to use them again. However, credit cards can help you in building a good credit rating. A favourable credit rating is a must if you wish to avail loans in the future. You may even stand a chance to negotiate and lower the interest rates if you have a good credit score. So, go ahead and swipe your credit card but we wary of a few things. Firstly, never max out your credit cards. Secondly, always pay your bills on time. Lastly, keep a track on how much you are spending. If you keep a constant check, there are fewer chances of going beyond the limit.


Prepare a budget

Now maybe a good time to reflect what got you into this mess in the first place. Is it because you couldn’t control your shopping urges or because an emergency knocked on your door? For some of you, it may be as simple as not having a budget in place. Without a budget, it is difficult to keep a track on your expenses. You don’t have to be a financial wizard to prepare a budget. Instead, you can use an app to create your monthly plan. To get started, think of different expenditure buckets like food, bills, shopping, gas etc. Allocate an approximate amount to each of these buckets. This simple activity will keep your expenses in check.


Don’t apply for too many credit cards

Several people have a habit of hoarding credit cards. Not only do they attract yearly fees but they may tempt you to spend more than required. It is suggested to have only 2-3 credit cards. You can do your research to get the best benefits and rewards out of these.

Being under debt is certainly stressful. With no plan, it can even give you sleepless nights. The key is to learn from your mistakes and avoid similar situations in the future.