Just ask yourself: is the credit card work for me or am I working for the credit card? Most people's answer to this question will depend on how they use their "plastic pal" as credit cards are often known. As many people with huge credit card debts will tell you, they didn't realize that things were so bad until too late, because most credit card companies try so hard to make themselves seem like a charity. Well, take it from me, they aren't.
However, this is not an anti credit card campaign. They have their benefits - in the USA, for example, if you want to hire a car, you must have a (major) credit card. But, consider this situation:
You receive an offer in the post 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 immediately purchase the product. Typically, here is how your repayment schedule will play 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 towards the principle!
Does it sound worrying? 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 great deal of truth in the advice 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 mind. Furthermore, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you need and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction could assist you plan more wisely.
2] If you are caught up in financial difficulties, it's always a good idea to talk to the credit card supplier who might re-schedule your repayments. If you simply default, that only builds up an unfavourable credit history for you and you could find yourself being refused credit in the future.
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 mailbox is full of information on credit cards with more favourable deals than you currently are enjoying, you could approach your issuer for a better deal. They want to retain you as their customer, so they will listen.
Don'ts
1] Do not use your credit card to purchase household items. It is 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 are able to pay off the debt the better.
3] Never use the credit card to purchase items you can't afford. - 29866
However, this is not an anti credit card campaign. They have their benefits - in the USA, for example, if you want to hire a car, you must have a (major) credit card. But, consider this situation:
You receive an offer in the post 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 immediately purchase the product. Typically, here is how your repayment schedule will play 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 towards the principle!
Does it sound worrying? 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 great deal of truth in the advice 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 mind. Furthermore, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you need and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction could assist you plan more wisely.
2] If you are caught up in financial difficulties, it's always a good idea to talk to the credit card supplier who might re-schedule your repayments. If you simply default, that only builds up an unfavourable credit history for you and you could find yourself being refused credit in the future.
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 mailbox is full of information on credit cards with more favourable deals than you currently are enjoying, you could approach your issuer for a better deal. They want to retain you as their customer, so they will listen.
Don'ts
1] Do not use your credit card to purchase household items. It is 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 are able to pay off the debt the better.
3] Never use the credit card to purchase items you can't afford. - 29866
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If you are thinking aboutswapping or applying for a Credit Card, have a look at the free advice on our web site about using Credit Cards wisely.
