Just ask yourself: is the credit card working for you or are you working for your credit card? Most people’s response to that question will depend on how they use their “plastic friend” as credit cards are sometimes 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.
But this is not an anti credit card campaign. They have their uses - in America, for example, if you want to hire a vehicle, you have got to have a (major) credit card. But, think about this scenario:
You get an offer in the mail that sounds good, perhaps 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 item right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the remaining 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 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 replaying in your mind. 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 only want. You need the essentials, but you just want everything else. The ability to make a distinction could 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 issuer who might re-schedule your payments. If you simply default, that only helps to build up a bad credit history and you might find yourself being denied credit in the future.
3] Unless it is an emergency, remaining within your credit limits will help you a lot. If you have to 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 could 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 term.
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 products you can’t afford without the credit card.
If you are considering changing or getting a Credit Card, check out the free advice on our website on using Credit Cards wisely. Get a totally unique version of this article from our article submission service
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Tags: advice, auto, banking, Credit, credit cards, debt, Finance, funds, Loans, money, Mortgage, other, self help, shopping