Budgeting Financial Planning 10 Ways to Avoid Credit Card Debt By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on January 17, 2022 Reviewed by Somer G. Anderson Reviewed by Somer G. Anderson Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. learn about our financial review board Photo: LaylaBird / Getty Images Americans are carrying a record of $4.2 trillion in credit card debt as of December 2019. That breaks down to an average of $6,194 in credit card debt per household. Carrying too much credit card debt comes with a number of risks—thousands of dollars in interest payments, delayed financial goals, and possible even damage to your credit score.Credit card debt can be avoided, as long as you maintain spending and payment habits that help you avoid getting yourself in over your head. 01 of 10 Build a Safety Net Fanatic Studio / Getty Images Without access to emergency savings, a credit card may be your only option to save you from a major car repair, medical bill, or other unexpected expense. While it takes time to build the oft recommended savings large enough to cover six months of living expenses, starting with a small amount like $500 or $1,000 can help you take care of those little expenses that pop up. You can build your emergency fund steadily over time rather than having to rely on debt to rescue you. 02 of 10 Stick to What You Can Afford Vera Kandybovich / EyeEm / Getty Images Access to credit can be tempting when you spot items you want to purchase but really can't afford. While you might rationalize that you can easily pay over time, promising your future income is risky. A better habit: save up for things you want rather than putting them on credit and only swipe your credit card for purchases you can afford to repay right away. 03 of 10 Avoid Unnecessary Balance Transfers Huntstock / Getty Images Transferring a balance from a high interest rate credit card to one with a lower interest rate is a smart move to pay off your balance at a lower cost. However, transferring balances to outsmart the credit system, for example to avoid a payment due date, can backfire. Repeatedly transferring balances without paying off a significant portion of the balance can lead to an ever-increasing balance once the balance transfer fee is tacked on. 04 of 10 Always Pay on Time valentinrussanov / Getty Images Staying on track with your credit card payments is one of the best ways to avoid credit card debt. Once you miss a payment, your next payment due will be much higher since you'll have to make two payments plus pay the late fee. It gets tougher to catch up, puts a strain on your budget, and tempts you to use your credit cards to make ends meet. Note The late fee for one missed payment can be up to $29. A second missed payment in a six-month period can incur a fee as high as $40, depending on your credit card. And two missed payments in a row can trigger the higher penalty rate and cause a spike in your monthly finance charges. 05 of 10 Pay Your Full Balance Each Month Richard Goerg / Getty Images Paying your entire balance each month is the best way to avoid credit card debt. Starting with a zero balance each month completely eliminates the risk of getting into credit card debt. You never have to worry about whether you can meet the minimum payment because your credit card has already been paid in full. To pull this off, you have to be disciplined and only spend as much as you can afford to pay off in a single month. 06 of 10 Know the Signs of Credit Card Debt krisanapong detraphiphat / Getty Images Recognize the early warning signs of credit card debt allows you to pull back on your current spending habits and replace them with moves that benefit you in the long run. For instance, if you notice your credit card balance is too high to pay in full, it's a sign that you've charged too much. Curbing your spending until you've paid off the balance will prevent you from making your debt worse. 07 of 10 Avoid Cash Advances on Your Credit Card BraunS / Getty Images In a moment of desperation, you might consider taking out a cash advance on your credit card. However, it's one of the most expensive credit card transactions with a transaction fee, higher interest rate, and no grace period for avoiding finance charges. Lack of access to non-debt money sources could signal serious financial trouble. Note A cash advance usually is one of the early stages of credit card debt. Work on fixing your budget and create an emergency fund so you don’t have to use a cash advance in an emergency. 08 of 10 Don't Lend Out Your Credit Card Jose Luis Pelaez Inc / Getty Images You're ultimately responsible for all the charges made to your credit card and lending your credit card puts control of your credit card balance with someone else. If the go on a spending spree and refuses to pay up, your credit card issuer still holds you accountable for repaying that balance. 09 of 10 Understand Your Credit Card Terms pawel.gaul / Getty Images Your credit card agreement spells out everything you need to know about using your credit card—how interest will be applied, the fees you'll be charged and when, and anything that could cause your to go up. Understanding these features of your credit card can help you avoid credit card debt because you understand how using your credit card costs more. Note You can review the credit card terms before applying for a credit card. Contact your credit card issuer for a current copy of the terms of any existing credit card. 10 of 10 Limit Your Number of Credit Cards Stella / Getty Images The more credit cards you have, the greater the opportunity to get into debt. Even if you have solid self-control, it's better not to tempt yourself with thousands of dollars in available credit. Reducing the number of credit cards in your wallet not only helps you avoid credit card debt, it also makes it easier to manage your monthly bills. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Board of Governors of the Federal Reserve System. "Consumer Credit - G.19," Experian. "2019 Consumer Credit Review." Vanguard. "What's the Right Emergency Fund Amount," Capital One. "Tips to Avoid Late Payment Fees," Capital One. "Want to Use Your Credit Card to Get a Cash Advance," American Express. "What to Know About Your Cardmember Agreement and Credit Card Terms,"