Today, credit cards have become an integral part of modern day living. They make the purchase of goods and paying bills much easier and negate the need to carry cash. Not only that but they also automatically record all of the expenses that we make as well as protect us when goods or services are delivered defective or not delivered at all. In some cases credit cards even allow people to earn rewards points that they can use on many different types of goods and services.
Of course, for all of the good things about credit cards there is definitely a ‘bad’ side to them. The fact is, millions of people around the country find themselves in financial crisis mode because of overspending that they got themselves into using their credit cards. It’s for this reason that knowing exactly how credit cards work and also how to use them correctly is vital to any financial plan. To that end, the tips below should help greatly. Enjoy.
- Don’t carry too many credit cards. While it’s true that a credit card can definitely be useful in an emergency and also help to facilitate the ease of making payments, having too many is a temptation that few people can withstand and, once in credit card debt, a situation that is very difficult to recover from. Having one credit card for emergencies that you rarely use and another that gives you reward points on your purchases is a good plan, as long as you pay both in full at the end of every month.
- Using a credit card to pay for a medical emergency or relying on that card to be your emergency fund if an emergency arises is not a financially intelligent idea. Better to have an emergency fund in cash or savings to do the same and avoid the interest and other fees that you will certainly get if you use your credit card.
- The amount that you spend on your credit cards should be determined by the ease of which you can repay that money. Simply put, spending more on your credit cards then you can repay at the end of the month is highly undesirable and is the reason that millions of people are in credit card debt. Unless what you’re purchasing is a vital need, using your credit card to purchase it is a financially bad idea.
- Never use your credit card for cash advances. This simply is one of the worst things you can do with your credit card and, in most cases, it means that you’re simply living beyond your means.
- Another thing to avoid is bank transfers as they come with balance transfer fees that can put you further into debt. On the other hand, if you are able to transfer for a low fee in order to take advantage of an excellent interest rate, it might be advisable.
- As mentioned above, paying your credit cards in full and on time is extremely important. If you pay your credit card bills late fees you’ll be hit with can be quite large and you could also risk having the interest rate on your credit card increased. Paying the minimum is also not a good idea as, over time, the interest rates could add up to quite a bit of money.
- Understanding exactly what your credit card agreement entitles you to and holds you to is also quite important. From transaction fees to interest rates and anything else that can affect how much you pay, you’ll need to know specifically so that you can avoid those extra charges and fees at all costs. There’s nothing worse than having too much debt on your credit cards and then watching it increase every month as you make payments late or make only the minimum payment.
- Being able to recognize that you’re getting into credit card debt is vital to your financial health. If you are starting to become stressed that you don’t have enough to pay the bills, you may already be too late. Instead, take every purchase into full consideration and look at exactly how those purchases will affect you financially at month’s end. If you can do this and, of course, cut down on your credit card usage you will be much better off, believe us.
- Don’t trust anyone else with your credit card. If you know your spouse has a problem with overspending or your frivolous adult child asks to borrow your credit card, you do best be prepared to say “no” and stick to your guns. If you don’t you may find that not only do you have credit card debt but it’s debt that you never wanted or cost to begin with. If there is a financial situation that really bites the big one, this has to be it.
Being financially responsible means taking care of your credit cards as well as your overall credit score. While credit cards certainly aren’t evil, they can easily put you into debtors hell. Treat your credit cards with the respect that they deserve and you’ll find that, at least financially, you stay a few steps ahead of the pack. If you have any questions about credit, finances in general or anything else that relates to personal finance, please let us know and we’ll get back to you ASAP.
