Just ask yourself: is the credit card working for you or are you working for your credit card? Most people’s response to this question will depend on how they treat 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.
And this is not a hate campaign against credit cards. They have their uses – in America if you want to rent a car, you have got to have a (major) credit card. But, consider this scenario:
You get an offer in the post 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 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 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 only want. You need the essentials, but you only 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, staying 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 mailbox is full of information on credit cards with more favourable deals than you currently are enjoying, you may approach your issuer for a better deal. They want to keep you as their customer, so they will listen.
Don’ts
1] Do not use your credit card to purchase household items. It is very expensive in the long term.
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.
If you are thinking onswapping or applying for a Credit Card, check out the free advice on our web site on using Credit Cards wisely.
categories: credit cards,credit,finance,loans,mortgage,money,self help,advice,banking,funds,debt,shopping,auto,other
Related posts: