Ask yourself: does the credit card work for you or do you work for your credit card? Most people’s answer to that question will depend on how they use their “plastic friend” as credit cards are often known. As many people with burned fingers will tell you, they didn’t realize that things had gotten so bad until very late, because most credit card offers try so much to sound like they are actually running a charity. Well, they aren’t.
However, this is not an anti credit card campaign. They have their uses – in the USA, for example, if you want to hire a vehicle, you must have a (major) credit card. But, consider this situation:
You receive an offer in the mail that sounds good, maybe it’s a new TV or fridge. But it costs $2,000. You have a credit card with a $5,000 limit so you immediately purchase the item. Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum percentage of the total balance (usually 2 percent) per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only $10 towards the principle!
Does it sound worrying? Well, it doesn’t need to be. The moral of the tale is to use the credit card very, very carefully.
Credit Cards Dos and Don’ts
There is a great deal of truth in the saying that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme song playing in your mind. Furthermore, you would be wise to remember the following as well:
Dos.
1] Always plan for the purchases that you have to have and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction might assist you plan more wisely.
2] If you are caught up in financial difficulties, it’s always a good idea to talk to the credit card supplier who might adjust your payments. If you just default, that only helps to build up an unfavourable credit history and you might find yourself being denied credit in the future.
3] Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.
4] If your letterbox is chock-full of information on credit cards with more favourable offers than you are currently enjoying, you may always approach your issuer for a better deal. They want to keep you as a customer, so they will listen.
Don’ts
1] Do not use your credit card to purchase household items. It is very expensive in the long run.
2] Do not only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The quicker you are able to clear the debt the better.
3] Never use the credit card to purchase products you can’t afford without the credit card.
If you are considering changing or applying for a Credit Card, have a look at the free advice on our web site on using Credit Cards wisely. Also published at Be Careful With Credit Cards.
Related posts:
- Credit Cards And Choosing One
- What Are Low Interest Rate Credit Cards?
- Credit Card Applications For Beginners
- Credit Cards That Require 0 Purchase
- The Importance Of Using Real Money Before Credit Cards
- Learn More About Airmiles Credit Cards
- Credit Cards FAQ
- Three Credit Cards For Individuals With Low Credit Score
- Air Miles Credit Cards For Persons With Fair Credit
- Debt Caused From Credit Cards Is A Major Stress
Tags: advice, auto, banking, credit, Credit Cards, Debt, finance, funds, loans, money, mortgage, Mortgage Debt, other, self help, shopping