Money secret No. 16: Avoid credit card debt

Some people grow up feeling certain that debt is bad. Perhaps they witnessed their parents or other relatives suffer under the burden of debt and thus were too scared to ever get a credit card. Or perhaps they witnessed their parents buying a lot on credit and living beyond their means. Part of their salary – and their attention – went toward the credit card bills, which had no end in sight.

We only occasionally hear that there are good debts and bad ones. Basically, you should avoid bad debts and find out how to use good debts.

Credit card debt belongs to the category of bad debt. The first problem with credit cards is that they generally have high interest rates. The second is that they’re basically designed for you to be paying them off forever. The third is that they’re easy to get. Why is that? Banks are so willing to give you money because they earn so much off it themselves.

If you want to use a credit card, I recommend that you use it like a debit card and pay it off in full at the end of every month. Use mileage and other rewards programs your credit card offers and pay everything off at the end of the month. Credit card debt accrues easily and piles up quickly, and because of the high interest rates, you bear the burden for a long time. If you must use a credit card for an emergency, plan for how you’ll reduce your expenses to pay off the debt as quickly as possible.

As for the good debts… more on that soon!

Money secret No. 16: Avoiding credit card debt is a smart move. If you already have credit card debt, make a plan to pay it off as quickly as possible.