Responsible Credit Card Use

Ads are everywhere. We’re exposed to different sorts of products and promotions daily. The latest gadgets, clothing, shoes, beautiful sceneries and images of our favorite celebs jet-setting to wherever they want – just to mention a few. Advertisements play a huge part in encouraging people to purchase new things. In this matter, we’re encouraged to spend big, not only on things we simply “want,” but things that we “want” that truly hold no value or long term significance.

Trapped by Credit Card Debt

So what does this have to do with credit cards? Lots of men and women tend to make purchases in the moment, believing that they can charge it to their credit cards and pay at a later time. Most credit cards offer introductory 6-12 months of 0% interest, making it even easier to buy more than we need without considering the true cost of our credit card use.

True, using a credit card has benefits. You may use it in case you don’t have enough cash, or lots of folks use credit cards because it is safer than carrying cash. These tiny plastic cards can easily place someone to a bad debt situation if not used responsibly. Credit cards arent just a “buy now, pay later” method, its a “buy now, pay later, plus a little extra for the convenience,” method of payment. Unless you pay off the charge that month, you wind up spending extra money for the convenience of not having to “pay” at the time of purchase. But in all borrowing scenarios, you must repay the money you borrowed in time. If not, you’ll quickly find yourself deep into debt and possibly with poor credit.

0% Interest…

Getting trapped by credit card debt is frighteningly simple when you have a card with an offer of 0% interest. This happened to me – I got my first credit card to “build my credit,” and it of course came with 0% interest for a whole year. I was probably told at the time that this was 0% interest as long as I paid the balance in full by a certain date, but it went in one ear and out the other – probably because I was more excited about getting a piece of plastic worth $3,000. Imagine my surprise when I realized I was going to be charged all of the interest at once because I had never fully paid off the card in that first year! I was young, but more careful with my credit card usage than most of my friends… Yet in 12 short months, I tanked my credit worthiness and it took a long time to recover.

Avoiding Credit Card Debt

How do you use a credit card to your advantage and stop it from placing you into a deep financial hole?

  1. Don’t throw away your purchase receipts. This sounds like “old-timey” advice, but in 2018, it still applies. Why? You’d be surprised. It is possible to use these receipts to examine if all fees on your monthly credit card statement are correct. By doing this, you can make certain you are only being charged for purchases you’ve made, and only charged once. On several occasions I have been charged twice for one purchase, and not known it because the card had enough to cover the additional rogue purchase.
  2. Pay the bill, on time, every time. With a good relationship with your card company, you can sometimes get a little more time to pay your credit card bill. However, if youre using a card responsibly, you shouldn’t find yourself in this position in the first place.
  3. Pay the entire amount due. Credit card companies require that you pay only the minimum amount due, but this is just another trick which lets them make more money from you. The minimum amount due does not actually pay off that amount! If your minimum payment is $100 a month, only a fraction of that, maybe $30, goes towards the balance of the card. The rest is interest!
  4. If paying the entire amount due isn’t possible, at least pay more than the minimum. To prevent credit card debt, pay the complete amount, or as much of it as possible to help decrease your balance quickly. Lenders want to see that you not only pay on time, but that you pay on time and take action to resolve outstanding debt as quickly as you can.
  5. Don’t lend your credit card to anyone. I’m not going to explain this one. Just don’t do it.
  6. One credit card is sufficient. Do you really need two personal credit cards? If you find yourself applying for another card, get real with yourself for a moment – are you applying for a second card because your other one is …. maxed out?

Credit cards are powerful, and even the most careful, well-off credit card holders can find themselves in a bad spot with their credit card debt. Be smart and read the fine print! Even if it takes you an hour, read the fine print. This last part seems obvious, but don’t just grab what appears to be an”exciting offer”without considering how you intend to pay off the amount you charge.