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Avoiding credit card debt

[Jul 1, 2011.]


Relying on payday loans once in a while may be the only solution for consumers who are strapped for cash and don't have any available credit on a credit card. If you have too many payday loans, however, it is time to reevaluate your entire financial picture so that you can build an emergency savings fund and avoid the need for easy payday loans.

First, make a list of all of your debt and minimum payments and then write down your income. See if you can find places to cut spending so you can eliminate credit card debt faster.

Credit card tips

  • Balance transfer cards. If you qualify for a new credit card, you may be tempted to transfer the balance to a card with a lower interest rate. While this could be a good solution, make sure you are aware of the balance transfer fee before you decide it is worth it. Make sure you won't simply charge more on the old card once it has been paid in full.

  • Pay the maximum, not the minimum. If you just make the minimum payment on your card, it could take you years to repay the full debt. Develop a plan to pay off the balance in full by using a credit card debt repayment calculator.

  • Pay your bills on time. Late fees can significantly slow your debt reduction plan. Sign up for payment due alerts and pay your bills online to make sure your creditor receives the funds by the due date.

  • Watch your credit limit. Not only will you be charged a fee, but your credit score will go down if you max out your credit cards. If you cannot pay your balance in full, aim to keep your credit use to 30 percent or less of the credit limit.

  • Avoid cash advances. Using your credit card for cash incurs a high ATM charge and, worse, a higher interest rate on the cash advance.

Secured credit cards

If you are unable to qualify for a credit card, you may want to consider applying for a secured credit card in order to rebuild your credit. As you make payments on a secured credit card, your credit score will rise and you can eventually apply for an unsecured credit card.

The best way to avoid too many payday loans is to reduce debt and develop a savings plan so you can use your own money rather than borrowed money to pay for an emergency.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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