Credit Cards Dos and Don'ts
Just ask yourself: is the credit card working for you or are you working for your credit card? Most people's answer to this question will depend on how they treat their "plastic pal" 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 very 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 the USA, for example, if you want to rent a vehicle, you have got to have a (major) credit card. But, think about this scenario:
You get an offer in the post that sounds good, maybe it's a new TV or refrigerator. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and buy 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 (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!
Sounds scary? 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 advice 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 head. Furthermore, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you need and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction could help you plan sensibly.
2] If caught up in financial difficulties, it's always good 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 next time.
3] Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.
4] If your letterbox is chock-full of information on credit cards with more favourable offers than you are currently enjoying, you could always approach your issuer for a better deal. They want to keep you as a 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 just pay the minimum amount. You will end up paying exorbitant amounts of interest. The quicker you are able to clear the debt the better.
3] Never use the credit card to purchase products you can't afford without the credit card.
But this is not an anti credit card campaign. They have their uses - in the USA, for example, if you want to rent a vehicle, you have got to have a (major) credit card. But, think about this scenario:
You get an offer in the post that sounds good, maybe it's a new TV or refrigerator. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and buy 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 (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!
Sounds scary? 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 advice 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 head. Furthermore, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you need and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction could help you plan sensibly.
2] If caught up in financial difficulties, it's always good 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 next time.
3] Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.
4] If your letterbox is chock-full of information on credit cards with more favourable offers than you are currently enjoying, you could always approach your issuer for a better deal. They want to keep you as a 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 just pay the minimum amount. You will end up paying exorbitant amounts of interest. The quicker you are able to clear the debt the better.
3] Never use the credit card to purchase products you can't afford without the credit card.
About the Author:
If you are considering changing or getting a Credit Card, have a look at the free advice on our website about using Credit Cards wisely.
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