Just ask yourself: is the credit card work for me or am I working for the credit card? Most people’s reply to this question will depend on how they treat their “plastic pal” as credit cards are often known. As many people with huge credit card debts will tell you, they didn’t realize that things were so bad until too late, because most credit card companies try so hard to make themselves seem like a charity. Well, take it from me, they aren’t.

However, this is not an anti credit card campaign. They have their uses – in America, for example, if you want to hire a car, you must have a (major) credit card. But, think about this situation:

You get an offer in the mail that sounds good, maybe it’s a new television or fridge. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and buy the item right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the total balance (typically 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!

Does it sound scary? Well, it doesn’t have to be. The moral of the story 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 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, and you 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 issuer 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 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 full to the brim with details on credit cards that have better deals than you are currently receiving, you can 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 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 items you can’t afford without the credit card.

If you are considering changing or applying for a Credit Card, check out the free advice on our web site about using Credit Cards wisely.

categories: credit cards,credit,finance,loans,mortgage,money,self help,advice,banking,funds,debt,shopping,auto,other

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