Habits of People With No Credit Card Debt

With the average credit card debt in America reaching nearly $6,000¹ it can sometimes feel like credit card debt is simply part of life. But it doesn’t need to be.

It’s possible to live without credit card debt – and there are people with zero credit card debt to prove it.

So what are they doing differently than you? We’ve broken down some of their good credit habits so you can get rid of credit card debt – and stay that way.

Good credit habits to get out of credit card debt

Getting rid of credit card debt takes resolve and persistence. It also takes establishing good credit habits. Here are some to get you started toward that sweet $0 balance.

• Monitor your spending
  Tracking your spending can be one of the most effective ways to lower your credit card debt. After all, to lower – or better yet, eliminate – your account balance, you need to know what you’re adding to it. Examining your monthly statement is a great place to start. You can also try a number of expense-tracking apps — like Trim — to monitor your spending as you go.

• Pay more than the minimum monthly payment
  It’s tempting to just pay the minimum amount due each month. After all, paying your minimum monthly payment on time will keep your payment history strong and help avoid late fees. However, if you’re aiming to get rid of credit card debt, paying more than the minimum due is the way to go.
  
  For example, if your minimum payment is $50 and you pay $75, an additional $25 could go toward your principal balance. It could also reduce the amount of interest you pay over time. Before you try this method, check with your card issuer to make sure the extra money will go toward your principal balance.

• Always pay on time
  If you’re missing monthly due dates, you could unknowingly be racking up late fees, which can range between $29 to $40.² Depending on how many credit cards you have, and how often you’re paying late, that can add up fast. The consequences of paying late are more than a larger balance. If you’re over 60 days late, you can be hit with a hefty penalty APR as high as 29.99%.³ And, since payment history makes up a whopping 35% of your credit history, your score can take a major hit as well.⁴

• Set aside emergency funds
  Emergency funds can be useful for many reasons, including keeping credit card debt down. But you don’t use the money to make monthly payments — you use it so you don’t charge unexpected expenses on your credit card.
  
  Think about it: What would you do if your car broke down and your repair bill was $2,000? Or if your refrigerator stopped working and a new one cost you $1,500? If you don’t have an emergency fund in place, or the extra cash on hand, your only choice could be a credit card – and you could be stuck paying off that balance for years to come.

• Have a long-term plan
  Whether you’re trying to rebuild your credit or save for future goals, a long-term plan can help you keep spending in check while you chip away at credit card debt. You can stay on course by creating a financial plan with a start date, end goal and a series of milestones in between.

• Educate yourself on personal finance
  If you’re struggling with credit card debt, you may be struggling with other aspects of financial wellness, too. The best remedy? Learning the basics of personal finance. (We like to call it the Core Four.) You don’t need to master everything at once. But once you start implementing healthy financial habits, you’ll find your credit card debt will start going down as well.

You can do this.

Eliminating credit card debt takes time. So does changing your financial habits. But with careful planning, determination and willpower, you, too, can join the $0 Balance Club – and stay there.

1. Johnson, Allie. “Average Credit Card Debt Statistics.” CreditCards.com. https://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276/ (accessed June 29, 2021). 2. Irby, Latoya. “Late Fees on Credit Cards.” TheBalance.com https://www.thebalance.com/what-is-a-late-fee-960701 (accessed June 29, 2021). 3. Lake, R., & Merritt, J. “What Happens When You Pay Your Credit Card Late?” CreditCards.USNews.com. https://creditcards.usnews.com/articles/what-happens-when-you-pay-your-credit-card-late (accessed June 29, 2021). 4White, Alexandria. “Want a good credit score? This is the most important factor.” CNBC.com. https://www.cnbc.com/select/this-is-the-most-important-factor-that-determines-your-credit-score (accessed June 29, 2021)