Credit card debt in the U.S. has hit $1.004 trillion dollars according to new data from the Federal Reserve, this is the highest it has been since January 2009. We talk a lot about credit card rewards & sign up bonuses on this blog, it can be an insanely profitable hobby but the flipside is that it can be an insanely costly one too. I think this is a good reminder of what you should/shouldn’t be doing.
- Don’t carry a balance. The interest rates on credit cards are typically much higher than other loans. By paying rates of ~20% it’s easy to fall into a cycle of debt that is difficult to get out of. My general rule is if you can’t pay for it on cash, you shouldn’t be putting it on a credit card.
- Be cautious of general overspending. It’s very easy to justify making purchases you’d normally not make just to reach the minimum spend requirement on a credit card.
- Cancel/downgrade cards with annual fees. More and more cards come with annual fees these days, often the annual fee is waived the first year. Make sure you cancel or downgrade cards with annual fees if the benefits do not outweigh that annual fee. Read our post on downgrade options here.
- Keep accurate records. We’ve provided you with a spreadsheet to make tracking important information easy, make sure you actually use that or another system.
I’ve been guilty of doing one or more of the above in the past (mostly the overspending), there is nothing wrong with making mistakes but it’s much better learning from others instead. I really don’t want any readers to fall into a vicious cycle of debt, I’ve seen that ruin lives before and my goal with this site is to save and make money for my readers.
