Credit card debt? How to plan your spending

Adhil ShettyBankBazaarRecent data on the spending patterns in India shows an upward trend in credit card outstanding, which should set some alarm bells ringing. Banks, which are already facing rising loan non-performing assets (NPAs), may not prefer a situation where credit card debts rise to uncomfortable levels. For individuals as well, this may spell bad news since it means many consumers may well be spending well beyond their repayment capacities yet are blissfully unaware of the same.Here is a look at ways in which you can make sure your credit card debt remains under control leading to an efficient and well-tuned financial life.How you can maintain a credit card effectivelyIt is essential that you assess your own spending patterns and credit usage to see if you are in danger of entering red territory. Here are some tips that you can make use of so that your spending and credit card dues stay under control. Give preference to debit cards: As a financial rule, prefer your debit card over your credit card for any purchase. Credit cards may be easy and convenient to use but come with the risk of you not be able to pay the card bill on time. Why walk down the risky path of a credit card outstanding when you can buy a product using your debit card and ensure peace of mind?Buy only what you need: With the onset of ecommerce, there has been an increase in the number of impulsive and discretionary purchases. While you are the final decision-maker in terms of what you want to purchase, prioritize on items of need as opposed to items of want.Make a budget: Taking a hard look at what you bring in versus what you spend. Seeing how much you are spending each month on clothes, electronics, and other luxury items can be a major wake-up call. Create a budget, and then use your credit card for purchases until you hit your predetermined spending limits. This will help you control your expenditure. Do not max out your credit cards: It is a good practice not to let your credit card debt exceed more than 20 percent of your total yearly income after taxes. Each month, do not have allow credit card payments gobble up more than 10 percent of your monthly take-home pay. This will mean that you have a chance to pay out your debts faster instead of accumulating them on high interest rates.Know the credit card billing cycle: Your credit card may offer you a 50-day interest-free period but that need not necessarily start from the day of your purchase. Know your credit card billing cycle, identify the start of your interest-free period, and try to make all purchases at or near this start. This alone will help you cut out many unwanted purchases or invisible expenses.Pay more than the minimum due: Credit card interests on late payments are very high. Pay all your dues in one go. If it is not possible, make it a point to always clear as much monthly dues as possible. It will reduce the finance charges you may incur. Be sure not to skip any payments. Skipping payments hurts your credit score.Prioritize your credit card payments: If you already have a high credit card debt, find out ways in which you can repay your debt faster. Find other means like any emergency cash reserve or liquidating some investments to close your credit card debts as early as possible. If you do not have investments to fall back on, ask your bank to offer you a personal loan or a top up loan on your home loan to pay back your credit card debt.Use your credit card responsibly so that bad debts remain just a phrase in the dictionary. This will help you and your credit card issuing bank both breathe easy, without any unnecessary worries of rising credit card debt.