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 treat their “plastic pal” 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 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.
However, this is not an anti credit card campaign. They have their plus points – in America, for example, if you want to rent a vehicle, you must have a (major) credit card. But, consider this situation:
You get an offer in the post that sounds great, maybe 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!
Does it sound scary? 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 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 song playing in your head. Moreover, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you need 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 adjust your payments. If you just default, that only helps to build up an unfavourable credit history and you might find yourself being denied credit next time.
3] Unless you are experiencing an emergency, staying within your credit limits will help you a great deal. If you have to spend over the limit, ensure you are within manageable levels, say within 30 percent.
4] If your letterbox is chock-full of information on credit cards with more favourable deals than you are currently enjoying, you may 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 goods. It is too 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 are able to pay off the debt the better.
3] Do not use the credit card to buy things you can’t afford.
If you are thinking onchanging or getting a Credit Card, have a look at 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
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