Ask yourself: does the credit card work for you or do you work for your credit card? Most people’s response 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 too late, because most credit card offers try so much to sound like they are actually running a charity. Well, they aren’t.
But this is not an anti credit card campaign. They have their uses - in America, for example, if you want to hire a car, you have got to have a (major) credit card. But, think about this scenario:
You get an offer in the mail that sounds good, maybe 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 product 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 worrying? 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 saying 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, but you only want everything else. The ability to make a distinction could assist you plan more wisely.
2] If caught up in financial difficulties, it’s always good to talk to the credit card issuer 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 next time.
3] Unless you are experiencing an emergency, staying within your credit limits will assist you a great deal. If you must spend over the credit card limit, keep within manageable levels, say within 30 percent.
4] If your mailbox is full of information on credit cards with more favourable deals than you currently are enjoying, you could approach your issuer for a better deal. They want to retain you as their customer, so they will listen.
Dont’s
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 purchase things you can’t afford without the credit card.
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Tags: advice, auto, banking, Credit, credit cards, debt, Finance, funds, Loans, money, Mortgage, other, self help, shopping