Credit Cards Dos and Don'ts

By Bob Jones

Ask yourself: does the credit card work for you or do you work for your credit card? Most people's answer to that question will depend on how they treat 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 gotten so bad until very late, because most credit card offers try so much to sound like they are actually running a charity. Well, they aren't.

However, this is not an anti credit card campaign. They have their benefits - in the USA, for example, if you want to rent a vehicle, you must have a (major) credit card. But, consider this situation:

You get an offer in the post that sounds good, maybe it's a new television or refrigerator. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and purchase the product right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the remaining balance (typically 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 you borrowed!

Does it sound worrying? Well, it doesn't need to be. The moral of the tale is to use the credit card very, very carefully.

Credit Cards Dos and Don'ts

There is a lot of truth in the saying 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, 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 just default, that only helps to build up a bad 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 help you a lot. If you must spend over the limit, ensure you are 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 keep your business, so they will hear you out.

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 more quickly you are able to pay off the debt the better.

3] Never use the credit card to purchase items you can't afford without the credit card. - 21392

About the Author:

If you are thinking onswapping or applying for a Credit Card, have a look at the free advice on our web site on using Credit Cards wisely.