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MainStreet.com: 8 Habits of People Who Never Carry Any Credit Card Debt

Mar 4, 2015

This article was published on MainStreet.com’s website on March 4, 2015.

1. They have an emergency fund and a vacation fund.

People who have no credit card debt do not rely on their cards for emergencies, says Erin Ellis, financial educator at Philadelphia Federal Credit Union.
"They regularly save money so that if something comes up, they have the cash on hand to solve the problem. They don't end up making a bad situation worse by going into credit card debt," she says. "Additionally, they have separate savings accounts for vacations and holidays."

Often people find themselves paying for holidays and vacations long after they are over because they use credit cards rather than cash or debit, she says. Thankfully, if you save in advance for these big expenses, you can avoid racking up debt after the fact.

2. They know the "rewards" trap.

Although it may be tempting to use your credit cards for all your purchases to rack up rewards points or cash back, it's easy to overspend and end up carrying a balance from month to month, Ellis says. "If you are not paying off the balance in full, the 1% cash back is not worth the 15% interest you are paying on your balance," she says. "People with no credit card debt might take advantage of rewards, but they do not fall into this trap."

3. They leave their credit cards at home.

If you decide you want to spend only $30 on dinner, only take $30 — in cash — with you to a restaurant. "If you use your credit card you are likely to add that extra appetizer and another glass of wine just because you can," Ellis says. "If you only have cash, you'll avoid that temptation." Whether you're dining out or shopping at the mall, it's harder to part with actual dollars, consumer saving expert Andrea Woroch says. "If you are tempted to buy more, the time it takes to go to the ATM to get more cash out will give you time to think through the purchase," she says.

4. They spend within their means.

People who carry credit card debt live beyond their means, Woroch says. "Get real about your income and your lifestyle by assessing your spending. Use apps like Mint to organize your financial accounts in one place," she says. "The app also categorizes your spending so you can pinpoint your trouble areas and learn how to cut back."

5. They make weekly payments.

Small payments allow you to stay on top of the balance before the figure gets out of control, Woroch says. "Making smaller, weekly payments seems more manageable and doable than making one large payment at the end of the month," she says. "Plus, if you are taking money out of your account to make weekly payments, you'll be less likely to spend more when you see that lower balance."

6. They shop with a list.

Impulse shopping is a major cause of credit card debt. Always shop with a list and don't let yourself divert from it, Woroch says. "If you find yourself tempted to buy something you didn't plan to, put down the item and walk away. Finish the rest of your shopping. Chances are, the urge to buy that other item will pass." If you've still got the urge to make the purchase, go home and think about the item. If you're shopping online, go ahead and fill that online cart — then close out of the website. Oftentimes you'll fulfill the urge to shop without actually buying anything this way, she says. 

7. They make it hard to access their credit card.

This is an extreme habit, but may be ideal for those who have had credit card issues in the past, yet don't want to get rid of their card for emergency purposes. "Freezing your card in a block of ice will surely limit impulse spending," Woroch says. "A less extreme measure is to give your credit card to a loved one or spouse. This way you have to ask for your credit card and face justifying your shopping to your loved one who may make you realize it's not a necessary purchase."

8. They check their credit score regularly.

Realizing your credit score is less than perfect is often a serious motivator to get your credit and spending in check, she says, recommending a regular check with CreditKarma.com or similar business. "It's is important to keep up with your account to ensure there are no mistakes or fraudulent activity, like identity theft," she says.

— Written by Kathryn Tuggle for MainStreet

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