Monthly Budget Tips for Avoiding Credit Card Debt

Shopping sprees are a lot more fun when you have the cash in hand.

Credit cards are certainly a necessary modern convenience. Without one, you might not have the ability to rent a car, reserve a hotel room, or book a flight. They also make purchasing online possible. But when credit becomes something you rely on to finance everyday life, debt creeps in and starts building up.

Credit card debt is avoidable, but it takes a healthy dose of discipline. Reducing it takes time, and the result is worth it. Cash in hand is the way to avoid excessive credit card use. But to gain enough cash, you'll need to start saving.

Here are three tips for reducing and avoiding credit card debt, and building up savings for a stronger financial profile:

Resist Credit Purchases by Using Cash

Credit cards shouldn't be an extension of your regular cash flow. If $200 of available credit on a Mastercard gives the sensation that there's $200 more in your budget, it might be time to reconsider how you manage your money. If you've ever used that $200 to pay a bill, there's more reason to examine your finances.

Available credit and available cash are not the same. This seems like a simple idea, but it's easy to get carried away with spending when you know you can spend more than you've got. When finances are tight, using credit to overspend puts you into the negative. You'll pay more than you should, when interest is factored in, and the minimum monthly payment on that card will only go higher. When you rely on credit every month you are losing wealth, not gaining it.

Carrying cash is the simplest way to avoid credit card spending. Set aside what you'll need for a week or a pay period, and only spend what you've got in your wallet. This is a tough habit to build, but your credit card debt will thank you.

Making larger monthly payments puts you in control of your debt.

Make More than the Minimum Payment

Minimum monthly payments are just that -- the bare minimum. This does nothing for you except keep your account in good standing. It does everything for the credit card issuer, since the longer you make payments the more interest you'll pay over the long haul. A better strategy is paying more than the minimum each month.

BB&T Bank gives a staggering example of how paying the monthly minimum can cost you a fortune. On a credit card with a $5,000 balance, 12% annual interest and a 2% minimum monthly payment, it could take nearly 25 years to pay off the balance.

However, if you commit to paying $250 a month, the debt will be eliminated in closer to 23 months. Minimum payments give more to the bank in interest over the life of the debt. When you pay more than the minimum, you're paying down a substantial amount of the principal, which eliminates interest a lot sooner.

Build up Savings, and You Won't Need as Much Credit

Credit is often used to fill the gaps when you don't have enough money to make a purchase. The root of that problem is lacking cash; saving is the way to resolve it.

Discipline and saving go hand in hand. It's so easy to buy a new watch or take a vacation if there's enough available credit to cover it. With cash in the bank, you won't pay more than you have to because there won't be any interest charges paid to the bank that extended the credit. Waiting to make a purchase until you can afford it with cash is the way to increase your wealth instead of diminishing it.

Savings should be in at least three categories. Retirement savings is for later, and you should never touch it. Emergency savings is what keeps an unexpected expense from ruining you financially. For example, if your vehicle is out of warranty and the transmission goes out, emergency savings means you're back on the road without acquiring new debt or getting behind on your normal responsibilities.

The third category of savings helps you avoid credit on planned purchases. If you want a new TV, need a new roof, or want to buy a dirt bike, saving up for it lets you buy it free and clear. offers many budget solutions that help you reduce and avoid credit card debt. You can plan a budget and see it in real time, and you can also experiment to see how adjustments would affect your finances. If you're considering a cash-purchase lifestyle, Mint can help with that, too. Enter cash purchases into the mobile app as you make them, and your budget automatically updates.

Sign up for your free account today and start reducing your reliance on credit one step at a time.