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 treat 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 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 benefits - in the USA, for example, if you want to hire a vehicle, you have got to have a (major) credit card. But, consider this scenario:
You get an offer in the mail 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 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 (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!
Does it sound worrying? 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 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 head. 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, and you want everything else. The ability to make a distinction might help you plan wisely.
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 lot. 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 offers than you are currently receiving, you may 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 make household purchases. It's 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 more quickly you can pay off the debt the better.
3] Never use the credit card to purchase products you can't afford without the credit card. - 31377
But this is not an anti credit card campaign. They have their benefits - in the USA, for example, if you want to hire a vehicle, you have got to have a (major) credit card. But, consider this scenario:
You get an offer in the mail 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 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 (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!
Does it sound worrying? 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 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 head. 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, and you want everything else. The ability to make a distinction might help you plan wisely.
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 lot. 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 offers than you are currently receiving, you may 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 make household purchases. It's 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 more quickly you can pay off the debt the better.
3] Never use the credit card to purchase products you can't afford without the credit card. - 31377
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If you are thinking aboutswapping or applying for a Credit Card, have a look at the free advice on our website about using Credit Cards wisely.
