Using Credit Cards Prudently

A credit card is an incredible convenience that has immeasurable rewards and benefits, but it can lead some people into trouble because they don’t have good training in personal finance, or find they are living in difficult circumstances. If we haven’t found ourselves in credit card trouble we probably know others who have. The way you use your credit card is a serious matter that is taken for too lightly by many charge card users. If you think you are below average in the way you use credit, seek help so that you can improve. Read the basics about savings and budgets. There are local agencies that offer free credit counseling in almost any city and neighborhood, and chances are that you have a friend or relative who is very good and disciplined with money who can help you stay on top of things. Sometimes all it takes is to be responsible enough to do your homework and plan ahead on good credit use. Following are suggestions about credit card use that can help those who struggle with credit and credit card use. Credit cards are like loans. You have to pay what you owe. You have to pay what for what you purchased and if you are not paying that purchase off immediately you will be paying a measurable amount of interest on that money. Think of a credit card purchase as a loan that you have to pay back in thirty days. On the other hand, do not think of credit cards as loans that should be used for items of normal consumption. Think of your credit card as a convenience, not a way to buy things that you can’t afford. When you use your credit card think of it as paying with cash. This is a habit of thought that will help you to limit your spending. Track how much you spend on your credit card. Always know your exact balance before going out, this sounds odd only if you don’t know how frequently you use your credit to make unnecessary purchases. Little $20 purchases here and there add up. Pay cash to keep yourself in touch with reality. Make yourself think about how much you are spending. Always look at the receipts that you get in stores or restaurants for credit card purchases. You’ll be surprised how often there are mistakes between what you thought you were paying and what the receipt says. Often in stores there is a difference between the price on the item and the price in the store computer that ends up on your receipt. Studying the receipt is also one of the most powerful ways to make the average consumer understand just how much money they charge and what the costs of individual items are in a purchase involving several items. Careful review of receipts can be the starting point to a well-designed savings program. Keep your credit card receipts and compare them with your monthly bill. If there are any discrepancies, report them to your credit card company immediately. Don’t give out your credit card to friends and family, and don’t leave it lying around at home or in your place of work. Have a place for it where it is secure and keep it there. The less accessible it is, the less likely you are to lose it or use it. Don’t owe more money than you can repay. Watch those expenditures on the weekend. Excessive use raises the balance on the credit card more often than single large purchases. This can damage your credit, and that hurts your chances of getting a car loan, mortgage, insurance, or even a job. Most importantly, pay your credit card bill – and all of your bills - on time. This is the single most important factor in determining your credit rating. When debt becomes overwhelming, never ignore the problem. The psychological pain from procrastination can be as much if not more than that of your credit rating. If possible, pay your bill in full every month. Over time monthly interest charges really add up. It’s a really bad habit to pay off one credit card with another, especially if you use checks that a credit card sends you for which you have to pay an especially high interest rate. This can send you into a tailspin of mounting credit card debt that can become insurmountable. Balance transfers that improve your position will help, but be cautious and make certain it is an improvement, not a postponement. Go out without your credit card. If you see something that you really want to buy, go home and get the card. This gives you a little emotional distance and a cooling off period during which you will decide if you really want the item or not. Pay with cash and think of your credit cards as a cushion. A credit card can bail you out of many situations when you are out of cash or have an expensive emergency but it can lead to problems if you use a credit card for everyday purchases.