Americans have recently racked up nearly $1 trillion in credit card debt and that’s an all-time record high! Of greater concern is that delinquencies or overdue payments are rising, especially among the young. In fact, up to 40% of Americans can’t pay more than the minimum, carrying a balance that results in thousands of dollars flushed down the toilet each year in interest.

It’s time we recognize the trap of easy access to money in the form of credit, which allows us to spend more than we earn. In return for this debt, you receive rewards points that don’t even come close in value to the amount you would pay in interest charges. It’s important to understand 2 things about credit cards:

• Besides a convenient way to pay for things, credit cards are nothing more than CREDIT BUILDING & CREDIT MAINTAINING tools.
• The only money you have available to spend is the CASH in your bank account.

How to Use Your Credit Card Without Racking Up Debt:

1. Determine how much you can spend on your credit card, so you can pay your credit card bill IN FULL every month:

Example: Assume you can set aside a $2000 monthly cash spending allowance to pay your credit card bill IN FULL every month.

2. Determine the credit card balance at which you would stop using your credit card, so that you only have a small balance owing each month:

Example: Assume your credit card has a $10,000 credit limit and you want no more than a $500 balance owing every month. Remember, you need to show card ‘activity’ to help build your credit score. Therefore, you would stop using your credit card when you have a $9500 credit limit remaining.

3. Overpay your credit card by an amount that meets your spending allowance determined in Step 1, while leaving you with a balance owing determined in Step 2.

Example: You can afford a cash spending allowance of $2000 and you’re comfortable with a balance owing of $500 every month. This means you would overpay your $10,000 credit limit card by $1500 every month , so that you end up with an $11,500 credit limit. If you spend $2000 on your card, when the bill arrives you would only have a $500 balance owing.

4. You may be wondering: “Why do I have to overpay my credit card? Why can’t I just use my available credit, up to my cash spending allowance?”

Example: For the same $10,000 credit card, assume you charge $2,000 in expenses, so that you stop using your card when you reach a credit limit of $8000. As it often occurs, what if you’re tempted to tap into your $2,000 cash allowance that you set aside to pay your credit card bill? Now you’ve used up your cash allowance and dread the $2,000 credit card bill that’s about to arrive. By overpaying your credit card, you have some financial leeway before you end up with a balance owing.

5. The benefits of this strategy include:

• You never have credit card debt owing by managing to make payments IN FULL every month.
• You increase your credit score by showing ‘positive credit card activity’ with low use of credit [credit utilization ratio].
• You still get the rewards points simply by using your credit card.

The solowealth strategy to use your credit card without racking up debt is one of the best credit card hacks you will ever learn. Apply it and pass the knowledge down to your kids for a debt-free future.

You know you need a credit card to build credit, but if you’re having difficulty getting approved, no problem! Simply start by applying for a secured credit card such as the Credit Builder Card. Once you’ve built enough credit, you can apply for a credit card of your choice, but remember what you learned above to avoid getting into credit card debt – forever!