credit card debtUpdated: Oct. 11, 2018

Although owning a credit card is a great way to help establish and build your credit, there are times when a credit card can get you into trouble, or worse, into serious debt, particularly if you aren’t practicing responsible credit card habits. By making unplanned purchases that result in constant credit card balances which don’t seem to budge after you make a payment, you could find yourself in a cycle of credit card debt that’s hard to get out of. Even though this credit card debt cycle isn’t all that uncommon, as a recent consumer study found that two in 10 adults carry credit card debt month to month, it’s likely something you’d prefer to avoid getting into. Not only do late payments impact your credit, but paying interest on a balance can get expensive rather quickly. If you’re looking to escape the cycle of credit card debt or avoid credit card debt altogether, we’ve got a few tips to help.

Get to know your spending habits

The first step in breaking the cycle of credit card debt is to figure out what purchases you’re putting on your credit card(s). To do this, you’ll want to take a thorough look at your monthly credit card statements. Many credit card issuers even offer a helpful tool to cardholders that breaks down your spending habits by purchase categories (e.g., clothing, groceries, gas, etc.) to make this even easier for you. Next, determine what purchases were necessary and what purchases were spur of the moment or unnecessary purchases. Even if you’re only using your credit card for smaller purchases (e.g., $5 here and $3 there), you’d be surprised at how all those purchases can add up. After you complete an evaluation of your credit-related spending habits, you’ll want to take a look at your cash accounts, such as your bank accounts, to determine what you’re spending your cash on, as you may be overspending your cash, then reaching for a credit card to cover other expenses. You will also want to evaluate your cash purchases to see if they are necessities or excessive spending.

Create a budget

Once you see what you’re charging to your credit card and where your money is going, you can create a budget. The easiest way to get started with this is to separate the necessities (e.g., rent or a mortgage payment, cell phone bill and groceries) from the luxuries (e.g., happy hour drinks and ordering take out) to see if your income can cover all of these expenses. If not, you should cut what you can do without. By cutting out some of the non-essential purchases, you’ll not only make sure you live within your means, but also free up extra income that you can use to pay off or pay down your credit card debt. Your budget should also note how you’re going to pay each expense, so you can divide the money accordingly. For example, if you opt to use a credit card to pay your bills since it’s a more secure way to pay, you’ll want to make sure you transfer any cash you have to that credit card to cover the payments, as failing to do so will only land you in more credit card debt. It’s also important for you to know that a budget is not something you set and forget. In fact, you should update your budget on a monthly basis (at least) to reflect your current spending habits (e.g., your December budget will likely be very different from your April budget). Additionally, it’s wise to also make sure your budget aligns your paycheck with when your bills are due, which brings us to our next point.

Set up automated payments

Whether you’re paying with a debit card or credit card, most banks and credit card issuers have some sort of automated payment option available to help you pay your bills by a specific date each month. Although this isn’t an option for everyone, automation might be a good idea for someone who tends to make late credit card payments, which not only results in hefty late charges and accrued interest on your overdue balance, but also have lasting and damaging effects on your credit, especially considering the fact that your payment history makes up 35% of you credit score. It should be noted that if you set up automatic payments, you’ll want to make sure it’s not only enough to cover at least the minimum payment, but also something you include in your budget, as it will do you no good if you’re overdrafting your bank account(s).

Consider a balance transfer credit card

Those who are paying an arm and a leg in interest may want to opt for a balance transfer, as these types of credit cards allow you to transfer your current balance to a new card offering a long 0% intro APR period, giving you plenty of time to pay off the balance interest free. Balance transfer credit cards also provide you with a way to consolidate your credit card debt into one payment every month. It should be noted that most credit cards charge a balance transfer fee of 3% or 5% of each transferred balance, but this one-time fee is likely a lot cheaper than the ongoing interest you’re paying on your current credit card.

Which are the best balance transfer credit cards?

Not sure which balance transfer card is right for you? Here are some of our top picks:

Citi Simplicity Card – No Late Fees Ever

credit card debtIf you’re looking to avoid paying interest for nearly 2 whole years, Citi Simplicity Card – No Late Fees Ever (a NextAdvisor advertiser) offers the longest 0% intro APR on balance transfers of any card we’ve reviewed. This card has a 0% intro APR for 21 months on balance transfers made within the first 4 months (with a 5% balance transfer fee, $5 minimum). But that’s not all, as the Citi Simplicity Card also charges no annual fee and has a 12-month 0% intro APR on purchases. You can also select your payment due date, which means you can align your paycheck with your credit card bill to ensure you never make a late payment.

Discover it Balance Transfer

credit card debtDiscover it Balance Transfer is a great balance transfer card that is available to those with average to excellent credit (usually considered a score of 670 or higher) — note that the other cards in this post require good to excellent credit for approval — and offers some stellar cash back rewards, which means it’s probably a card you’ll want to keep in your wallet after you pay off the transferred balance(s). Cardholders will enjoy an 18-month 0% intro APR on balance transfers (with a 3% balance transfer fee) as well as a 6-month 0% intro APR on purchases. In terms of cash back rewards, you’ll earn 5% cash back in rotating categories each quarter (up to the quarterly maximum, currently $1,500, then it’s 1%) and 1% cash back on all other purchases. It’s important to note that you’ll need to sign up each quarter to ensure you get the 5% cash back, but Discover makes that easy, as you can opt to receive automated emails to alert you when the categories change. Plus, with Discover’s Cashback Match feature, you’ll effectively earn 10% cash back on rotating categories and 2% on all other purchases for the first year because Discover will match all your cash at the end of your first year. For example, if you earn $300 cash back in your first year, Discover will match that and give you a total of $600 back! Although this is only applies to the first year of owning this card, it’s still a great way to earn some extra cash in your pocket if you opt to make any purchases.

You can learn more about these cards and others by visiting our reviews of the best balance transfer credit cards reviews.

Contact your credit card issuer

If you already have debt that you can’t keep up with and you don’t qualify for a balance transfer credit card, your best bet is to contact your credit card issuer, or credit card issuers if you have multiple credit cards. Let them know your situation and see if they can somehow help lower your minimum payment or even your interest rate. If you’re having a problem with the due date — meaning it doesn’t align with your paycheck — you can also ask them if the date can be moved. Although some issuers will not be able (or willing) to help you, especially if you’ve missed payments, it never hurts to ask. If they fulfill your request, you’ll want to make sure you’re making on time payments every month, as it will not only help boost your credit scores over time, but also show your credit card issuer that you’re serious about paying off the debt.

After you pay off the debt, don’t avoid credit

While it may be tempting to pay off your debt and avoid credit cards altogether, you could be doing some major damage to your credit scores if you completely swear off credit. Similarly, the only way you can completely break a cycle of credit card debt is if you learn how to have a healthy relationship with credit. This means you’ll want to use your credit card responsibly by only making purchases you can afford, budgeting for these purchases and paying them off at the end of the month. If you worry that using a credit card may tempt you, just set up your cable bill or cell phone bill to autopay with a credit card, and then pay it off — this way you won’t have to carry the card on your person.

Building a healthy relationship with credit isn’t always easy, but if you stick to your budget and make sure you’re not overspending, you can effectively use a credit card to help you build or maintain good credit scores. Follow our credit cards blog to learn more tips and tricks for getting the most from your credit card.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.