Credit cards can be useful tools or the devil’s playground – depending on whether or not you use them responsibly. For example, a credit card can help you get a “short term” loan to pay for something where you don’t have the necessary cash in hand. Or, if you use it irresponsibly, it can drag you down into a swamp of debt.
Using credit cards responsibly
The first thing you need to do to use a credit card sensibly is to password protect it. Most credit card issuers do not offer password protection as a standard so you will have to request it. Once you password protect the card, it’s virtually impossible for anyone else (think thief) to use it.
Be sure to sigh the card
There’s a little strip on the back of credit cards where you are to sign your name. Make sure you do this immediately after you receive the card. This is essential should you ever lose the card or have it stolen.
Use it only when you have to
A credit card should be thought of as something you use when you have a sudden emergency or as a kind of cushion of support – and not as something you use to finance a big shopping spree. In fact, you should always try to pay cash for the things you buy.
Monitor your usage
It can be surprisingly easy to miss a credit card payment or to not pay off its balance at the end of the month. Either of these can trigger substantial fees. You really need to keep track of all your payments and be sure to budget enough to pay off your balance when it’s due.
Watch your interest rate
Many credit card issuers will tempt you into signing up for their cards with a low “introductory” interest rate that goes sky-high when that promotional rate expires. Be sure to check out the interest every time you receive a statement to make sure you’re paying what you had agreed to. Also – word of warning – with some cards if you miss a payment or exceed your credit limit, you may be automatically assigned a much higher interest rate.
It’s not free
You must always remember that credit cards are not free. The limit on your credit card does not mean you can spend that amount of money free of charge. Whatever you charge on that card must be paid back in full as well as interest. Your bank might increase your limit to encourage you to spend more but don’t do it. Never spend more than you need to.
Accept just what you need
You may be bombarded with credit card offers but this doesn’t mean you should accept all of them. The more credit cards you have, the tougher it will be to keep track of your payment due dates and your balances. While it might be tempting to charge just a little bit on several different cards, this can be a fast way to trouble. In fact, fewer is better and what’s best of all is to have just one card.
Pay off your balance(s) every month
Probably the most responsible way to use a credit card is to pay off your balance every month. If you were to decide for some reason to make only the minimum payment required, you’ve just started on what could be a slippery slide into debt hell. The credit card companies’ main objective is to keep you in debt. In most cases, that minimum payment will be only enough to cover the interest you’ve been charged and will do nothing to reduce your balance. This means if you were to pay only the minimum due every month, you might literally never get out of debt to that credit card company.