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 use their \”plastic friend\” as credit cards are often 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 receive an offer in the post that sounds great, maybe it\’s a new TV or fridge. But it costs $2,000. You have a credit card with a $5,000 limit so you immediately purchase the product. Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum percentage of the total 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 towards the principle!
Does it sound scary? Well, 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 replaying in your mind. And 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 just want everything else. The ability to differentiate might 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 supplier who might re-schedule 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, remaining within your credit limits will assist you a great deal. If you have to spend over the credit card limit, keep 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 retain 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 run.
2] Do not only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The quicker you are able to clear the debt the better.
3] Do not use the credit card to buy things you can\’t afford.
If you are considering changing or applying for a Credit Card, have a look at the free advice on our web site on using Credit Cards wisely.. This article, Credit Cards Dos And Don\’ts has free reprint rights.
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