Dave Ramsey Says This Move Could Help You Avoid Credit Card Interest

It's advice worth taking to heart.

There's a reason consumers are commonly advised to be cautious with credit card usage. You might think carrying a small balance here and there won't harm your finances all that much. But any time you don't manage to pay off a credit card balance in full, you start to accrue interest. The only exception is if you happen to have a credit card with a 0% introductory APR. And even then, you're only getting that break for a limited period of time.

What's especially dangerous about credit card interest is that it can often compound against you on a daily basis. And that could land you deep in a hole.

As a very basic example, you might start out with a $100 balance on a credit card. The next day, that balance might equal $100.15, because you've racked up $0.15 of interest that first day.

The day after that, when interest is calculated on your balance, it will be based on $100.15, not the original $100 you owed. So it's easy to see why you might fall into the trap of racking up scores of interest -- and landing in a situation where your credit card debt drags on and on.

Thankfully, financial guru Dave Ramsey has some great advice for avoiding credit card interest. And it's worth listening to what he has to say if the idea of racking up interest charges doesn't sit well with you.

Budgeting could spare you from debt

Ramsey cautions that when you use a credit card, it can be hard to know where your money is going and whether you'll have enough to last you the rest of the month. That's because you may not pay attention to the balance you're accruing.

That's why Ramsey strongly suggests following a budget. When you have a budget, you know what your various expenses cost you, and you can also better track your spending to know how much money you have left before your next paycheck arrives.

To be clear, following a budget doesn't have to mean not using a credit card. It's more than possible to set up a budget and use your credit card to pay your expenses. You just need to be keenly aware of what those expenses are and how much they cost.

Don't get caught in a debt trap

A big reason so many people struggle to get out of credit card debt is that they keep accumulating interest as they work to pay off their principal balance. And it's those interest costs that can make credit card debt spiral out of control.

Remember, if you end up carrying a credit card balance for three years, you'll end up paying a lot more than the amount you initially charged -- even if you don't add a single dollar in principal to that balance during that time. Rather, the added costs will solely be made up of interest.

Ramsey says that having a budget can help you be in control of your money. He even goes so far as to call it a total game changer. So if the idea of racking up credit card interest is appalling to you, get ahead of that situation. Put yourself on a budget and track your spending week by week so you don't end up with a credit card balance you can't pay off.

And if you already owe money on your credit cards, do your best to pay them off quickly, whether by cutting back on spending or taking on a second job. The sooner you get yourself out of debt, the less money you'll end up throwing away in the form of interest charges.