Credit Cards Dos And Don’ts
Just ask yourself: is the credit card working for you or are you working for your credit card? Most people’s answer to this 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 become so bad until very late, because most credit card companies try so hard to make themselves sound like a charity. Well, take it from me, they aren’t.
But this is not an anti credit card campaign. They have their plus points – in the USA, for example, if you want to rent a car, you have got to have a (major) credit card. But, consider this scenario:
You get an offer in the mail that sounds good, maybe it’s a new television or fridge. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and purchase the item right away. Often, this is how your repayment schedule will work 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 will come off the $2,000!
Does it sound scary? Well, it doesn’t have to be. The moral of the illustration is to use the credit card very, very carefully.
Credit Cards Dos and Don’ts
There is a lot of truth in the advice that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your head. And you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you have to have and those that you just want. You need the essentials, and you want everything else. The ability to make a distinction might help you plan 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 simply default, that only helps to build up an unfavourable credit history and you might find yourself being denied credit in the future.
3] Unless you are experiencing an emergency, remaining within your credit limits will assist you a lot. If you must spend over the credit card limit, keep 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 retain you as a customer, so they will listen.
Don’ts
1] Do not use your credit card to purchase household goods. It is too 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 buy things you can’t afford without the credit card.
If you are considering changing or getting a Credit Card, check out the free advice on our web site about using Credit Cards wisely.
