Chumbimba

How to Avoid Credit Card Debt

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Hey everyone,

im a 22 year old college student and realized how important it is to get you finances in order very early. I had a $500 dollar credit card bill (bought books with it) and paid it off. I hear of people having $5000-$30000 in credit card debt or way more and wanted to know how to avoid this trap. Also what would be good to use a credit card for if I decide to keep the one I have. Thank you 

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Don’t spend more than you earn and pay it off before you have to pay interest on it and you should be fine. If you’re worried, keep your limit low so you don’t overspend. If you start accumulating debt, stop using it, block it, repay it as quickly as you can as it can go out of control very easily.


I have an opinion on everything :D

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I think you shouldn't fool around with credit cards. They have their upsides, but mostly they are just a trap for people who can't withstand the urge to buy way more stuff they can afford etc ( in my opinion ).

Also, they are very popular in the gambing world for a reason.

Edited by Psyche_92

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On 04/08/2019 at 10:11 AM, Psyche_92 said:

but mostly they are just a trap for people who can't withstand the urge to buy way more stuff they can afford etc


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I recommend avoiding credit cards and even debit cards and just try to pay with cash money. I would give Dave Ramsey a listen as he has pretty solid financial advice. https://www.youtube.com/watch?v=rcVVGg4Xhg8


Why am I so differently wired? Am I a martian?

What kind of twisted experiment am I involved in?

Because I don't belong in this world. -Eminem

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@Chumbimba I don't have a credit card and don't miss it. Simplify your life to bare necessities, don't worry what everyone else thinks you should or shouldn't have/do, and be content with what you do have.

People use credit cards mostly to build their credit history to be able to make major purchases in the future, like a car or house. Better to save up enough to not need take huge loans out and then be enslaved by banks/creditors for years/decades. Renting is becoming a better option to owning these days. Can't take it with you anyways. Adopt essential living, and also what everyone else already suggested above.

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Having a credit card will help build your credit history and will make it a lot easier to get a mortgage or another type of necessary loan if you need one. Having no credit history isn't much better if it's better at all, than having bad credit. Pay it off every single month in full, no excuses. If you can't/won't get rid of it or don't get one. 

Edited by mandyjw

My Youtube Channel- Light on Earth “We dance round in a ring and suppose, but the Secret sits in the middle and knows.”― Robert Frost

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16 minutes ago, mandyjw said:

Having a credit card will help build your credit history and will make it a lot easier to get a mortgage or another type of necessary loan if you need one. Having no credit history isn't much better if it's better at all, than having bad credit. Pay it off every single month in full, no excuses. 

This.  

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@Natasha I really appreciate this. I am trying to minimize my lifestyle. I am getting more nauseated by materialism by the day. I don't but many material items. Mostly just books to read.

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@Chumbimba This might sound far fetched to some, but I also don't have TV cable and cellphone (just my laptop and home-phone). Gave up cable and cell years ago to have more time to do what I love instead, like being in nature, read, do my art, and travel. 

After my husband passed away, I also sold the house and have been renting a nice little apartment saving on owning mortgage, maintenance/repairs, property taxes and insurance, etc. Bought my car with cash too. No debt, no problem.

I know this life-style is not for everybody, but I do enjoy my debt (stress)-free living that gives me more freedom to enjoy life than when I used to own/maintain all the stuff I didn't need. I do have a good job and save up for retirement, though. 

 

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You avoid that trap by not buying things you cant afford. Be conscious of your income and needed expenses.

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You avoid credit card debt by setting it to autopay the full balance each statement. Carrying a running balance and then paying it off doesn't boost your credit score.

If however you want more buying power than you currently have in the bank, there is an important reason to borrow money and you have the means to pay it off later, credit cards are a much better alternative than taking out loans. You can use them as a cheap or even free loan basically.

Like let's say you want to invest some money in materials for learning useful skills that will pay off, some essential equipment for your work projects, or on the other hand if your immediate survival is threatened and you can't afford enough food. You can open a 0%APR for 18 months credit card and making minimum payments, or balance transfer with a zero interest period. The key is to view it as a short term loan you want to pay off before it charges interest, not free money to spend and then forget about.

 

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I don't use credit cards 'cause if I start spending money I don't have I just can't stop.

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Because of such debts, I had to take out a loan twice!

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Essentially, raise you awareness and keep your desires in check. This has so many benefits besides the OP concern. Consciousness prevents the buying happiness trap. The materialistic aspect is just noise, the real trap is your brain chemicals/hormones and how they are abused by the modern materialistic society.

The best thing to do is gain deep understanding how these factors work, you mind and thoughts, your brain chemicals/hormones and how capitalism exploit your psychology and the weaknesses thwy open up for. 

Credit is a slippery slope and you can buy instant gratification and build a deep addiction without noticing, and soon you work to pay off dept on a monthly basis just to keep your head above the surface and to be able to breath, instead of saving a month and pay in cash. And from there it's easy to get into some real trouble if something unforeseen happens. 

To build credit score you can still use the card and pay it off immediately, acting as if it was cash, and not relying on the credit to be a cuision.

Credit cards can be useful for emergencies but the goal should always be to build a savings buffer that can handle the typical "emergencies" that occur. 

Starting a long term savings plan with ETFs/index funds is even better, but building a cash buffer for a short term emergencies would still be the first step so that you don't have to touch the stock funds. 

It calls for being frugal to get a good start, and that in itself helps with looking at spenditure in a more healthy way.

Although falling into the overly cheap trap is quite common, denying oneself living in favor of crazy saving. 

Middle-road based on awareness. 

 

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I suggest researching passive income.

Create various streams of income. Work smart, not hard.

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