Credit cards have gotten a bad rap recently. We keep hearing about credit card debt, how many people have dug themselves into a financial hole by overcharging on those pieces of plastic. Yet having a credit card and using it responsibly is still possible. For many young people starting out in that first job, a credit card is a good first step towards establishing credit. So get that credit card but use it wisely.
Limit yourself to one or two cards. How many times have you checked out in a store and been told you could save ten percent by applying for that merchant’s credit card? Do you really need credit cards from stores? Most accept Visa, Master Card, American Express, or Discover. Yet marketing experts understand the consumer’s psyche. You may be overtaxed on your Visa bill, but you can still get that sexy lingerie if your Victoria’s Secret account is available. Except all those bills must still be paid at the end of the month and will come out of the same bank account. So get rid of the store accounts you have and avoid signing on for more. In the end you will find you spend less.
Leave your credit card at home. Going for a walk? Can’t resist that cute blouse in the boutique around the corner? You can avoid those impulse purchases if you don’t carry plastic.
Pay in cash. This strategy is the best way to avoid going into credit card debt. If you can only buy what you can pay for in cash, you will have the best chance to live within your means.
Keep track of your purchases. Do those charge card receipts end up in the bottom of your purse where you never look at them again? Collect them in one place and keep a running total. If you know how much you can spend each month, you will know when you are approaching your limit.
Pay off the balance each month. Doing so will allow you to avoid those hefty interest rates tacked onto the principal. If you cannot pay the entire bill, pay as much as you can. If you just send in the minimum payment, that amount will only cover the interest and you will never come close to paying off the total amount.
Avoid picking up the check. You are out for dinner with friends and you are the only one with a credit card. Don’t believe those, “Pay you tomorrow,” promises. If they don’t you are stuck paying the bill and hounding your friends for the funds. If others actually do pay that evening, chances are that cash in your wallet will disappear before the bill comes due and you may be caught short.
Watch the due dates on your statements. One friend reports that she was one day past the due date when she received a phone call from the credit card company. Companies are nervous! Expect that call if you are late. So check the date and make sure you allow enough time for your check to get there in the mail. Late payments can ruin credit. Your plan to build credit with a credit card will backfire if you are constantly late in paying your bill. Nothing will doom your credit rating faster.
Watch what you charge online. You may forget about that purchase you made online until your bill comes in. Print out any receipts for online purchases and keep them with your other receipts.
