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 pal” as credit cards are often known. As many people with burned fingers will tell you, they didn’t realize that things had got 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 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 great, perhaps 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 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 great deal 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 song playing in your mind. Furthermore, you would be wise to remember the following as well:
Dos.
1] Always plan for the purchases that you have to have and those that you just want. You need the essentials, but you just want everything else. The ability to differentiate could help you plan sensibly.
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 repayments. If you just default, that only builds up an unfavourable credit history for you and you could find yourself being denied credit in the future.
3] Unless it is an emergency, staying within your credit limits will assist you a lot. If you have to spend over the credit card limit, keep 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 retain you as a 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 only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The quicker you can clear the debt the better.
3] Never use the credit card to buy products you can’t afford.
If you are thinking onswapping or applying for a Credit Card, have a look at the free advice on our web site on using Credit Cards wisely. Get a totally unique version of this article from our article submission service
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