Credit card rewards make it easy to travel further from home and stretch our travel budgets as far as they can go, but there’s a downside to pursuing them — the potential for debt. Even if you’re frugal, it can be tempting to spend more than you planned to score a signup bonus. It’s also far too easy to accidentally rack up a balance you can’t quite afford to pay off.
Unfortunately, it’s often downhill from there. Considering the average credit card interest rate is well over 17% — and the fact that travel and rewards credit cards often charge higher initial rates than that — racking up debt in pursuit of rewards can be a slippery slope. One minute you’re trying to earn airline miles for a big trip, and the next you’re looking for a balance transfer card to escape the crushing interest rates you’re stuck with. I’ve seen it happen way too many times!
How to Avoid Debt While Pursuing Rewards
When it comes to credit card debt, an ounce of prevention is worth a pound of cure. In other words, it’s considerably easier to get a handle on your spending and your credit card bills before they become a problem. Here are four ways you can avoid debt while pursuing rewards:
1. Only use rewards credit cards if you’re also using a budget.
While it’s possible to use credit responsibly without a budget, having a written plan for your money can ensure you stay on track. With a monthly budget in place, you’ll have an idea of how much you should spend on regular bills plus discretionary categories like food and fun each month. With this plan to adhere to, you can plan your credit card spending accordingly.
2. Track your spending.
Of course, budgeting works best if you also track your spending. You may never know if you’re sticking to your $600 per month grocery limit unless you check, right? Make sure to break out your credit card statements at least a few times per month so you can check your spending and confirm you’re on track.
3. Pay your credit card bill several times per month.
My personal favorite tip involves paying your credit card bill a few times per month, and this is something I swear by. Not only does paying your credit card bill several times each month work well when you’re already tracking your spending, but it forces you to see the money leave your bank account right away. On a personal level, I know that seeing money leave my bank account feels a lot more “real” than charging it on a credit card.
4. Don’t overdo new signups.
One way I’ve seen too many people spiral into debt is in pursuit of credit card signup bonuses, and often more than one at a time. I distinctly remember reading in a Facebook group how one girl planned to meet the minimum spending requirement on her Platinum Card from American Express by taking out a cash advance at a casino and gambling to “double her money.” Her excuse? She could afford to lose it — at least that’s what she said.
Anyway, I’m a strong believer that you should only pursue new card signup bonuses if you can earn them through organic, planned spending — and maybe manufactured spending if it doesn’t require a lot of time or fees. Otherwise, the risk isn’t worth it.
How do you ensure you always have the money to pay your credit card in full each month? Do you follow any of the steps in this list?
[Featured Image: Shutterstock]
Source: frugal travel guy