The convenient thing about credit cards is that they let you charge things and pay for them later. Can't cover your entire balance by the time your monthly bill comes due? No problem -- just make your minimum payment, carry the rest forward, and pay it off when you can.
There's just one problem with that arrangement -- if you carry a balance, you'll rack up interest charges that cost you money. If you'd rather not throw your hard-earned money away on interest, make a point to follow these key rules.
1. Always have emergency savings
Some people get stuck paying credit card interest because they charge up a storm and can't cover all of their purchases. But not every high-interest situation stems from a lack of responsible spending. In some cases, you might rack up interest because an emergency expense pops up out of the blue, and you need to put it on your credit card in the absence of having the cash. A good way to avoid that scenario, however, is to always have a solid emergency fund -- ideally, one with enough money to cover three to six months of living expenses. If you make a point to maintain enough cash in the bank, you may not have to fall back on your credit card to cover surprise expenses.
2. Check your balance throughout the month
Some people land in credit card debt because they simply lose track of their purchases. But given how easy it is to log onto your credit card account and see what you've spent to date at any given point during the month, there's really no reason to land in that boat. Instead, put a weekly reminder on your calendar to go in and check your running credit card tab. If you see it creeping up too high, you can cut back on spending to avoid a situation where you're forced to carry a balance forward and pay interest on it.
3. Follow a budget in the first place
Without a budget, you can easily wind up overspending in different areas and wind up in debt because of it. Rather than run that risk, set up a budget and follow it. With a budget, you'll see what you can afford to spend on essentials and how much room you have left over for non-essentials. For example, if your budget calls for $200 in entertainment and you've already spent that much by the 20th of a given month, you'll know that you're now cut off until the next month -- which may stink from a social perspective, but it'll help you avoid making extra charges you can't afford. Having your spending categories -- and their respective limits -- mapped out will help you avoid going overboard and being forced to pay interest on charges that don't fit into that framework.
You work hard for your paycheck, so why risk losing some of it to interest charges? Follow these simple rules, and you may find that you never give your credit card companies another dime in interest again.
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March 27, 2021 at 06:32PM
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Stick to These Rules, and You'll Never Pay Credit Card Interest - The Motley Fool
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