Credit Cards Dos And Don’ts
Posted at by ifydcat on category CreditJust ask yourself: is the credit card working for you or are you working for your credit card? Most people’s answer to that question will depend on how they use their “plastic pal” 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 too late, because most credit card companies try so hard to make themselves sound like a charity. Well, take it from me, they aren’t.
However, 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 must have a (major) credit card. But, think about this situation:
You get an offer in the mail that sounds great, perhaps it’s a new TV 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!
Sounds scary? 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 song playing in your mind. Furthermore, 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, but you just want everything else. The ability to make a distinction could help you plan wisely.
2] If caught up in financial difficulties, it’s always good to talk to the credit card issuer who might re-schedule your payments. If you just default, that only helps to build up a bad credit history and you might find yourself being denied credit next time.
3] Unless you are experiencing an emergency, remaining within your credit limits will assist you a great deal. If you have to spend over the credit card limit, keep within manageable levels, say within 30 percent.
4] If your letterbox is full to the brim with details on credit cards that have better deals than you are currently receiving, you may always approach your issuer for a better deal. They want to retain your business, so they will hear you out.
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 more quickly you can pay off the debt the better.
3] Never use the credit card to buy products you can’t afford.
If you are considering changing or applying for a Credit Cards, have a look at the free advice on our web site on using Credit Cards wisely.