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How to Tell If You’re Headed for Credit Card Debt

Published February 26, 2014

Credit card debt affects consumers from all walks of life. In fact, millions of Americans deal with past-due credit card bills that they simply can’t afford to settle. If you’re one of them, you shouldn’t feel ashamed.

The only surefire way to prevent credit card debt is stop it before it begins. So, instead of falling into the trap of late fees, high interest rates and the like, use this article as a guideline to determine whether you’re headed for credit card debt and how to take the necessary steps to avoid it.

Unexpected Expenses and Events

Every year, thousands of Americans are blindsided by unexpected expenses or circumstances that are simply beyond their control. Common examples of potentially catastrophic expenses include:

  • Car accidents that produce hefty car-repair obligations and hospital bills
  • Unexpected illnesses that require lengthy hospitalizations or expensive drug treatments
  • Damages to your home or property that aren’t covered by insurance

In most cases, you can’t choose whether to pay the bills that result from these events. If you lack an emergency fund, you may have to accumulate significant credit card debt to deal with them.

Tightening Budgets

Other events or circumstances can conspire to constrain your budget over time. For instance, job loss or reduced hours can put tremendous pressure on your household budget and reduce the amount of money you can devote to your outstanding credit card bills. The arrival of a new baby or the long-term housing of an elderly relative may also have similar effects.

Using Credit to Meet Your Everyday Needs

Using your credit card for everyday purchases, such as food and clothing, can be a warning sign that you’re heading for trouble. Since credit card debt often sneaks up on you, it’s extremely easy to charge your card for small purchases. As you become accustomed to using your card over and over, your purchases begin to add up, which in turn puts you on the fast track to high interest rates and late fees. Make it a priority to not charge more than you can afford. Instead, keep tabs on your charges by using cash for all your everyday purchases.

Using One Credit Card to Pay off Another

As most Americans own more than one credit card, using one card to pay off another is a common theme in trying to delay credit card debt. Although it may be more beneficial to pay off the credit card with the highest interest rates first, using one credit card to pay off another is never a good idea.

How You Can Stop Credit Card Debt in Its Tracks

Fortunately, you don’t have to deal with credit card debt on your own. Credit counseling can help you slow and eventually reverse the growth of your debts without destroying your credit score or forcing you to make drastic choices.

Lower Your Interest Rates, Consolidate Your Payments

When you enroll in a debt management program, a team will negotiate with your credit card issuers to lower the interest rates on your outstanding balances. While it may still take some time for you to pay off your bills, this should free up much-needed room in your budget. At the same time, your credit counselor will consolidate your payments into a single monthly bill that’s easier to remember.

Create a Sustainable Financial Plan

As you work to pay off your existing debts, your credit counselor will also provide you with ongoing financial education and advice to help you plan for the future. You’ll learn how to budget on a monthly basis and build up an emergency fund to reduce the likelihood of future financial problems. If you take this advice seriously and stick with your plan, you can look forward to a much brighter, more sustainable financial future.

For more information on debt and credit management, visit CreditGUARD’s credit card debt page.

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