In an ideal world, no one would have credit card debt. Unfortunately, life happens and money can get tight in a hurry. When you least expect it, a small financial emergency pops up and too often the result is carrying a balance on a credit card. The average U.S. household with credit card debt owed $15,762 as of the fourth quarter of 2015 according to NerdWallet. So, when is it acceptable to carry debt on a credit card and when should you avoid carrying a balance at all costs? Here are a few guidelines to follow.
Avoid Carrying a Balance in Most Circumstances
Carrying a balance on your credit card should rarely happen. Credit cards often come with interest rates that can be higher than 10 percent, so borrowing money on a credit card is an expensive decision. It may be tempting to use a credit card to pay for something you want but can’t afford today. However, you should not to give in to temptation. Make sure you don’t carry a balance on purchases like vacations, movie tickets and dining out at restaurants. You’ll end up paying much more in total than the initial charge thanks to interest.
Only Carry a Balance in Emergency Situations
Emergencies are a rare time when carrying a balance on your credit card can be acceptable. Make sure you’ve exhausted other sources of money that may be cheaper than credit card debt, such as selling items you no longer use around your house, before you carry a balance on your credit card. If you have no other cheaper options, use your credit card but do your best to keep the charges as low as possible. Some common examples of emergencies which might cause you to carry a balance on your credit card include job loss, a major car repair or an unexpected medical condition. Make sure you only charge things you need, such as basic food to cook dinner, rather than wants, such as cable TV.
Save on Interest by Using Promotional Offers
There are ways you can save money in the unfortunate event that you have to carry a balance on a credit card. Many credit cards are currently have introductory offers such as a 0% interest on purchases for the first few months of card membership. If you’re already carrying a balance, there are offers that allow you to pay 0% interest on balance transfers for as long as 18 months, although many of these offers have balance transfer fees. In most cases, you need to sign up for the credit card and be a new cardholder to qualify for the promotional offer. Just make sure you pay the balance off before the introductory period ends or you’ll likely end up paying high interest rates again.
Make a Plan to Pay off Credit Card Debt
It doesn’t matter why you’re carrying a balance on your credit cards. What matters is coming up with a plan to get the debt paid off so you can quit paying high interest rates. There are three general options you can use to make paying off credit card debt a reality. You can earn more money, spend less money or use another type of loan, such as a home equity loan or a personal loan, to lower your interest rate. Figure out which options work best for you and take action to start chipping away at your credit card debt today.