You and your credit cards: tips for a conservative use of your credit cards
How do you feel about credit cards? How you answer that question will have a lot to do with how you’ve used them, both now and in the past.
If you haven’t had a problem with racking up consumer debt in the past, you may consider them a great convenience. You can even consider them a source of income by paying off your balance each month and taking advantage of rebates and rewards.
If, instead, they’ve proven to be too much of a temptation, you may see them as evil and do everything from freezing them in ice cubes to trying to get by without one.
It’s hard to do without a credit card these days. You need at least one for things like identification, reservations, and online purchases; let alone the unexpected for which you don’t have the cash.
In a fast-paced world like ours, the convenience of using a credit card is a positive factor for many of us. We can’t carry enough cash for all our purchases, and it’s much easier to hand over a plastic card than deal with writing a check and reconciling lengthy monthly bank statements.
With that being said, here are some things to remember when it comes to using credit and taking care of your credit cards.
– Know yourself. If you know you lack self-control, it’s best to put it in an ice bucket in the freezer. Be honest with yourself. I know I couldn’t be in a room with a piece of fudge without eating it, so if I don’t want to eat it, I don’t go there. Don’t go shopping with a credit card if you know your judgment will be affected by plastic vs. money.
– If a piece of fudge is okay, then just get a credit card with a low spending limit.
– Keep the number of your cards to a minimum. It’s much easier to go over your budget if you have more than one card. No one needs specific department store cards. No one needs more than two major credit cards.
– An easy way to make sure you stay within your credit card allowance is to deduct the amount of your charge when you get home from your checkbook. Then, when it’s time to pay the bill, the money is already set aside. Or you can keep a running total. Either way, don’t go into debt on “nickels and dimes.” Consider how much you are charging each month.
– Never carry a card with an annual fee. There are too many cards out there that are free.
– Some people keep one card for major purchases that they cannot pay at the end of the month and the other card for convenience and purchases that they know they will pay for at the end of the month. The interest rate on the first card should be as low as possible since it won’t be paid every month.
– Periodically check the interest rate of your credit card. They may change it for you. Make sure you get the lowest rate available.
– If you ever get turned down after submitting a credit card application, find out why. You are legally entitled to a free copy of your credit report and the reason it was rejected by the company that denied your application. Denial notices are official and come on paper. There will be a contact number that you can call and ask for this information.
– Remember that only paying the minimum balance on a credit card will never repay the loan. Even if the amount on your card never increases, the minimum monthly payment will decrease and extend the loan for years.
– If you do not pay your installments on time, it will go to your credit history for 7 years. Other credit problems can last up to 10 years. If you miss a payment, it’s a good idea to get a copy of your credit report and have the reason for the missed payment.
– Don’t assume that if a company gives you a high credit limit, you can afford the payment. No one knows all the facts about your financial situation except you, and the credit card companies want you to go into debt.
– Another advantage of using credit cards is that purchases paid with major credit cards offer consumer protection.
If you have a problem with a merchant, it’s much easier to get your money back with the help of your credit card company than it is to do it yourself.
– Remember that the interest you are paying on a credit card is much more than the interest you earn on money in a savings account. When possible, pay off those credit cards.
There is an old saying that says… “Whoever understands the interest receives it… Whoever does not pay it”.