How to Avoid Credit Card Debt

A couple years ago, my husband and I decided to buy a new TV. Ours was on the fritz and it was approaching the Super Bowl so TVs were on deep discount at Costco. While we hadn’t planned on this expense, between the cushion in our budget and some savings, we were able to pay for the TV out of pocket. But what if we had put this amount on a credit card?


Let’s do the math. Imagine that new TV cost $399.99. That doesn’t seem like a lot of credit card debt to carry — but did you know that on a card with an 18% interest rate (which isn’t uncommon), if we made only the minimum payment of $15/month, it would take almost 3 years to pay it off. AND, we would pay $114.66 in interest over that period. Despite the great deal we got, we’d pay more than a quarter of the cost of the TV in interest over time.


Credit card debt can cost you more than just interest, though. People don’t often consider the spending pattern it can create. For instance, by the time this new TV is paid off it may be time to buy another one. But making those credit card payments instead of squirrelling away that $15/month to save for a new TV, means that there’s nothing set aside when it’s time to make that next purchase — perpetuating the same cycle for the next three years.


Want to break the cycle? Start with these tips:


1.     Understand How Much This Debt is Really Costing You: It may just seem like a charge here and charge there, but it can really add up over the long-term if you aren’t paying off the balance every month. Use this calculator from to see how much you’re really paying over time and how long it might take to pay off your debt at your current rate.

Tip: Once you see how much you’re really paying, assign a value to it. For instance, that TV example tallied $114.66 in interest. Imagine what else could you do with that money: Take your partner out to a nice dinner; buy a new outfit from your favorite store; pay for gas for your next road trip. Or think long-term: Put that money toward retirement savings at age 30 and it could add up to almost $2,000 at your retirement age.[1]


2.     Create a Sustainable Budget: If you find yourself accruing credit card debt with day-to-day expenses, you’re struggling to live within your means. Creating a sustainable budget can help you cover today’s expenses and even plan for the future all within your current salary. Begin by tracking your spending for a month so you can see where your money is actually going. Pay attention to all expenses, large and small. Then begin categorizing the expenses into different “buckets” and define how much money you can spend on each category. Looking for some help along the way? Use an app like Mint.

Tip: Having trouble sticking to your budget? Put up some guardrails by using the envelope system. Instead of using cards, be disciplined about paying with cash. Start by allocating cash for different areas of your budget (like groceries, clothing, and entertainment) into envelopes. You can only spend what’s in the envelope — no more! Struggling with just one area of spending, like eating out? You might give yourself an envelope of cash just for that area and let yourself use cards for everything else.


3.     Give Yourself a Cushion: I learned early on that putting every single dollar I earned to work didn’t give my budget any breathing room for the unexpected, non-emergency expenses that come up every couple of months. As you create your budget, set aside a small percentage for miscellaneous expenses — then, only spend it if you need to. This little bit leftover each month will help your bank account to withstand small shocks without having to dip into savings. It also gives you the flexibility to take a job that pays less or take on an additional expense without having to make too many lifestyle changes.

Tip: Check in with your cushion every few months or so: Is it in a solid place, or are you just skating by? Make changes as needed. If you find your cushion growing quickly, don’t be afraid to allocate some of that money toward a savings goal — you’ve earned it.


4.     Plan Ahead: So many of the expenses we define as “unexpected” are actually things we can plan for. Is your car starting to show its age or your washer acting up? Don’t wait until it completely falls apart. Do a little research, decide on a goal number, and begin socking money away. If you struggle to come up with the money for a large annual expense (like taxes or an insurance premium), save up it throughout the year so you don’t have to overextend your budget for that month.

Tip: The biggest expenses that can often throw people off kilter budget-wise are fun things like vacations or Christmas. Don’t spoil your fun by landing yourself in debt. Instead, take the time to create a budget and save for it throughout the year. This may mean that you need to wait a little longer to go on vacation or do a smaller Christmas this year so you can start saving for next year right away in January. It may hurt a little bit now, but believe me, you’re setting yourself up for success in the future by not perpetuating a debt pattern.


5.     Establish Your Emergency Fund: Outside of creating a sustainable and realistic budget, building a short-term emergency fund should be your first priority, even if you currently have credit card debt. Scraping together that first $1,000 can give you a hedge against small emergencies, like a fender bender or an unexpected medical bill. Once you’ve got this short-term fund in place, begin working toward the larger goal of three to six months of savings.

Tip: Think of your emergency fund like a bill that you have to pay each month — even if you can only afford to sock away $20. Set up an auto transfer to savings for that amount the day after your paycheck comes in so you pay your future self before today’s temptations get in the way.

Want to dig deeper into this topic? Join my Date Night Club! This month I’m helping my date night club couples wade into the conversation about debt’s role in their financial life and their relationship. Is going into debt ever ok? How much debt is too much debt? Together, we’ll decide what a good relationship with debt looks like and how to live that out every day.

For just $9.99/month, I’ll provide you and your partner with a template for money date night success: icebreaker question, short video, discussion questions, and an activity. I’ll also send you reminders throughout the month so your money date night doesn’t fall to the back burner. I’d love to have you as a part of the club. Don’t have debt? Don’t worry! You can access any of the other date night topics we’ve discussed so far. Find out more today!

This Thursday, Aug. 15, I’ll be releasing a video on Instagram and Facebook where I’ll walk you through two of my favorite debt repayment strategies: the debt snowball and the debt avalanche.

[1] Assuming today’s age of 30, contribution of $114.66, retirement at age 67 and an 8% investment return.