Something looked odd on my credit card statement recently. Once again, my bank doubled my credit limit. I guess I have been such a good customer that my credit limit now is nearly 20 times the amount that I had when I initially got the credit card about five years ago.

Although the initial increases in my credit limits were nice and welcomed, this last one was slightly uncomfortable as I had to remind myself that more discipline is now needed. With the credit limit that I have now, I can refurnish my entire house, upgrade my car, or go on a long, dream vacation. And yes, all of these thoughts came to mind once I saw the amount that I have access to. No wonder the average US household with debt carries $15,762 (Dh57,847) in credit card debt. The availability and ease of accessing this debt make it harder to resist the temptation of using it. In reality, this ease comes at a very high price in terms of the interest rate that you will have to pay, penalties for failing to pay and so on. And that is why, if your credit card seems like an option to pay for anything that is not urgently needed, consider the alternative before reaching into your wallet.

Here are some options.

Personal loans

Although taking out a personal person for luxury spending is not recommended, these loans come at much lower rates compared to credit cards and with flat payments that you can budget for. The bank is also likely to do some due diligence to make sure that you will afford paying back the loan.

Although you may think that putting a big-ticket item on your credit card is easier since you’re planning to pay it off in a few months, this habit can be risky. If you end up unable to repay this item along with all the other costs that go on your credit card anyway, your debt can quickly spiral into an unmanageable amount. Then your only way out is to talk with your bank about a payment plan that still may be at a higher rate than if you simply had taken the money as a personal loan.

Financing

If you’re thinking about upgrading your car, you may get a much better deal if you trade in your car and finance the difference through a dealership. Because a car loan is secured, the rate is typically much lower even compared to personal loans – and definitely much more manageable compared to credit cards. Even if you’re considering a short financing period like six months, do approach your dealership first. You may end up with a much smaller, monthly payment that you can easily account for in your budget.

Similar financing is available through retailers for all sorts of major purchases. So don’t rush to put thousands of dirhams on your credit card hoping that you will be able to pay them off until you check first if the retailer offers some sort of instalment financing and you compare repayment plans.

Credit card offers

Some banks may offer you financing for free – no interest rate added – if you make your purchase through certain retailers using your credit card. So you should always check the offers that your bank provides. Having said that, make sure that the repayment period is manageable because most of these plans are for short financing periods. In addition, be clear about what penalties are there if you default or are unable to pay.

You simply need to read that fine print closely and be realistic about your ability to repay during the specified period. If you’re not sure, you should either choose a different type of financing or delay your purchase until a later time when you can afford it.

The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.

Credit card tips

- Avoid the temptation to max it

- Consider alternative, cheaper options

- Know the rates, penalties and fees involved

- Keep it for emergencies rather than luxuries