Using Credit Cards Wisely

Credit cards can provide you with several benefits, including emergency funds, purchase protection, program rewards and a credit history to improve your credit score. However, without being careful, it can be easy to misuse credit cards.

Improper credit card use can affect you financially, emotionally and physically. Among the financial dangers are overspending, too much debt and bankruptcy. Financial stress can lead to depression, insomnia and heart problems. You can avoid these problems by using your credit cards wisely and responsibly; here are few tips how:

  • Pay off your credit card balance every month and on time. Doing so will help you avoid finance charges and late fees.
  • Only charge what you can afford to pay now. It’s easy to think to yourself, “Well, I don’t have the money for this now, but I will soon.” That’s a dangerous way of thinking that will get you in over your head quickly.
  • Call your credit card company and ask for a lower interest rate. They might lower it, especially if you have a good credit score and excellent payment history. They definitely won’t do it if you don’t ask.
  • You know those “blank checks” your credit card company is always sending you in the mail? Shred them. They’re not actually checks; they’re actually cash advance loans with ridiculously high interest rates. They also don’t provide the same purchase protection as your credit card.
  • Limit the number of credit cards you have. Experts say you should have between two and six cards. Applying for too many cards can negatively affect your credit score, as can closing credit card accounts.
  • Pay more than the minimum monthly payment. It could take you 30 years or more to pay off your balance if you pay only the required minimum. Look on your credit card statement for exactly how long it will take you to pay off with the minimum payments.
  • Keep a keen eye on your account. Keep track of your charged purchases with receipts. This way, you can dispute any questionable charges that might show up on your statement at the end of the month.
  • Don’t ever lend your credit card to anyone. Sign the back of the card, and if your card has a PIN number associated with it, don’t ever share the PIN with anyone.
  • Read the fine print. Many cards offer a low interest rate at first, only to raise it later. Be aware of the grace period, annual fees and any other fees.

Photo courtesy of Andres Rueda.

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