Credit cards can certainly be a useful financial tool, but as many people have found to their detriment, it is also far too easy to get into trouble with them. As the interest mounts up, it then becomes harder and harder to pay off the balance, and before long they are wondering how on earth they are going to get rid of this debt. So here are my top 8 tips for using those cards sensibly.
Resist the temptation to apply for too many cards. You’re not trying to collect an entire pack! Just because a credit card company offers you a card, does not mean that you have to accept it. Be especially wary of applying for a new card to pay off others – only do this if you can move the balance to a card offering a cheaper rate.
Only use cards to pay for a purchase if you are certain that you will have the funds in your bank account to pay off the card IN FULL when the bill arrives. That $100 pair of shoes will cost you rather more if you start paying interest on the money.
Always remember that every time you use a credit card, you are borrowing the money and it must be paid back. If every time you hand that card over you see it as a debt – just a short-term one – it will help reinforce the mindset that you must repay what you are borrowing.
Photo Credit: am_express
Part two of the above point. Too many people seem to view a credit card as giving them free money. Nobody gives money away! The companies are hoping that you will pay off the minimum amount as they want to make lots of lovely interest out of you – don’t let them!
Never, ever, rely on credit cards to pay essential bills like utilities and rent. If you find yourself in a position where you don’t have the cash to pay these bills, seek help. Speak to the companies, talk to a debt advisor, but do not get trapped into increasing your debts.
Credit card companies have a sneaky habit of increasing your borrowing limit without asking you, because they know that people will then be tempted to spend more on the card. Don’t fall for this. Work out a sensible limit that would cover emergencies, and request that the company not increase it beyond that.
Oscar Wilde said "I can resist anything except temptation." He might have thought differently if credit cards had been invented. Don’t be tempted to buy the biggest and the best, simply because you could put it on your credit card. If you want a new TV, for example, think about what you need, shop around for the best deal, and don’t buy a $3,000 TV just because that’s your limit.
The time to use a credit card is when it offers you real benefits. By this, I don’t mean air miles or points towards "gifts." Use it when it will give you purchase protection, e.g when booking a holiday or making a major purchase.
I hope that these tips will be helpful to you. Credit cards are so common now that even the most sensible person can get carried away, so don’t let it happen to you. Make them work for you, and not the other way round! Do you have any other sensible credit card use tips to share?
Top Photo Credit: _Dinkel_