Don't let outstanding credit card debt get the better of you. Learn to spend within your means, rather than using plastic and hoping for the best.

Using positive money management techniques, such as avoiding unpaid credit card debt and saving more, will make a huge difference to your life.

As a financial adviser, some of the saddest stories about debt that I have seen are when a family’s finances are swallowed whole by unpaid credit card debt. Sometimes, there is a terrible spiral where John Doe will use Card A to pay off Card B, but he can’t manage his other expenses, so he’ll start purchasing with Card C, and so it goes on.

Many people follow the misconception that credit cards are magical pieces of plastic that buy you whatever you want and can be paid off whenever. Unfortunately, this is not exactly the case and if they are mismanaged, the consequences are dire. The only way to use credit cards efficiently is to manage them properly and not allow the debt to mushroom into something that you are incapable of paying back.

So how do you get out of the credit card crunch?

Cutting credit card debtCredit: Image: luigi diamanti /

First of all, change your consumer spending habits and try not to go beyond your means. Your credit card is not going to create funds that you don’t have. Start keeping a log of what you are using them for – and cut out everything that is not necessary. At the same time, see how many credit cards you own and transfer everything onto one. Why pay unnecessary charges for holding superfluous cards?

 Now that you have one credit card, start working on paying off the accumulated balance and scale down your use of plastic. Go back to good, old-fashioned cash. Need to go shopping? Then allocate a fixed cash budget for yourself. That way, you are spending what you actually have, not vast sums that you have no way of repaying.

 Many people keep a card for emergencies. But your best alternative is to build up an emergency fund by opening a monthly save-as-you-earn plan at the bank. Once you have an emergency fund, do not touch that – or your credit card – unless you have a true emergency, such as a broken washing machine or an unexpected dental expense.

If you put money aside for emergencies and you reorganize your spending habits, you will hopefully not need your credit card apart from in certain very rare cases. And if you always check and pay off your balance meticulously every month, you will save yourself a fortune in card charges and interest. And this money will work much better for you if you can invest it in a better future.

For some good ideas on how to improve your money management strategies, read: How Simple Money Management Strategies Help You Survive on Less Money.  


Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.