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7 Credit Card Sins That Will Ruin Your Financial Wealth

hand holding credit cardsYou do not want credit card debt in your future. It can cripple your limited finances when you need it the most. It is not something that you should leave out of control. You have to start acting on it now because if you let it accumulate, it can become a very big problem, not just for you but for the rest of your family as well.

What puts you in debt are the credit card sins that you are making. It is not really the ownership of the card that puts you in trouble. It is how you choose to use it. There are people who have owned credit cards for years but have never had any problems with debt. That is because they have learned how to use it well.

The good news is, a survey done by revealed that Americans are starting to get wiser when it comes to credit card use. In 2008, only 43% said that they always pay the full amount of their credit card balance. In 2014, it went up to 48%. That means people are still using their cards but they are no longer keeping balances in their cards. That eliminates the debt and allows the cardholder to maintain a good credit score since they are using credit responsibly.

7 credit card holder mistakes you should avoid

It is not complicated to manage your credit card debt but it does require discipline and self control. If you do not have it, then you will not be able to avoid committing the credit card sins that will eventually ruin your financial wealth.

But what exactly are these sins that you should avoid? Here are 7 of the most common mistakes that credit cardholders make.

  1. Making late payments on your credit card due. This is the easiest sin to commit – paying your credit card late. It is also the most common. You need to make sure that you can pay your credit card dues on time because if not, you will be given late penalty charges. Not only that, it will cause you to carry over your balance to the next billing cycle. That will end up bloating your current balance because of the finance charges that will be added to it. That being said, it is a must that you pay your credit card debts on time – no excuses. In case you know that you will not make it in time for your due date, call your credit card issuer immediately. They can help set up a temporary extension if your reason for making a late payment is valid. Just do not make a habit out of it.
  2. Using your credit card to access cash advances. The second of the credit card sins that you need to avoid is using your credit card to make cash advances. This is a big no-no. If you find your credit card interest rate to be high, then the cash advance rates of your card might just give you a heart attack. It is so high that it is usually not worth it to use as a solution to get out of a tight financial situation.
  3. Maxing out your credit card limit. Another mistake that you can commit as a cardholder is maxing out the limit on your credit card. Not only will it be hard to pay off the balance immediately, it will also affect your credit score. It will ruin your credit utilization – which affects around 30% of your credit score. You want to make sure that your debt amount is kept low so you will not be in danger of falling behind on your debt payments.
  4. Failing to monitor your credit report. A lot of people do not understand how this can be one of the credit card sins. They do not pay attention to their credit report because they feel that it is unnecessary. Well that is where you are wrong. According to the statistics found on the website of the National Criminal Justice Reference Service,, 17% of the consumer complaints received in 2013 is caused by credit card fraud. One of the most effective ways to recognize identity theft is by monitoring your credit report. You can check out any new accounts opened under your name. You can also monitor your debt amount if it is reflecting purchases that you did not make. You will be aware of these if you only monitor your credit report regularly.
  5. Spending on credit when feeling an emotional high. A lot of use don’t realize that this is part of the credit card sins that you need to avoid. If you are experiencing some sort of emotional high, it is not advisable that you go shopping – especially when you plan on using your credit card. If you are bursting with happiness and you want to reward yourself, use cash instead. The same is true when you are stressed or distraught. When you use cash, you can limit what you will purchase. During these shopping escapades, leave your credit cards behind to avoid overspending.
  6. Applying for new cards to get rewards. While the rewards are also important aspects of your credit card application, make sure that your primary reason for getting the card is borne out of necessity. Do not apply for the card if you do not plan on using it.
  7. Ignoring the fine prints. Lastly, you need to stop ignoring the fine prints. Admittedly, they are tough to comprehend but if you have questions, you need to ask the customer service. Do not skip reading this before you apply for a card. It can lead to a lot of the credit card sins we mentioned here. You do not want to violate any of the credit card rules and be penalized for it. Be in the know and you will not have to be charged for violating the rules of credit card ownership.

Tips to keep yourself from negative credit card consequences

If you want to avoid committing credit card sins, it is a must that you learn how to use a credit card responsibly. Here are some of the tips that you can use.

  • Budget what you will spend on your card. It is important that you include in your budget what you will spend on your card so you know what your limit is. The reason why we accumulate debt is because we fail to plan our credit spending. When you include it in your budget, you will know just how much you are allowed to spend and you can stop once you reach that.
  • Pay the amount before the grace period expires. The grace period is the time between your purchase and the due date of the billing where it is included. When you pay the balance within this period, you will not be imposed with any credit card charges or interest.
  • Maximize the rewards. We have mentioned that the rewards on your cards is important but it should not be the reason to get a new card. But if you have a card that you are always using, try to plan your spending so it maximizes any freebies or cash back rewards. That will add to your savings.
  • Be in the know. This is very important. Learn about the laws protecting you as a credit card user. You should also be aware of any recent developments about credit cards. For instance, there is the campaign to use smart credit cards to avoid or lessen the threat of identity theft. reported that 37% of survey respondents about these smart credit cards said that they prefer chip and PIN cards over signing signatures. You need to be aware of these developments so you can choose the card that you will have. You can call your creditor to discuss your options to change into a more secure card.

In the end, the key to avoid credit card sins is to understand every aspect of the card. Be wise and responsible and you should be free from debt for the rest of your life.

5 Credit Card Uses That Are Actually Smart

retailer cutting a clients credit cardCredit cards have gone through a lot of bad publicity in recent years. But despite that, you should know that there are smart credit card uses that will defend their existence in the financial industry. They really have uses that are beneficial to our finances – from the convenience of a cashless transaction to the extra layer of protection for your money.

But of course, we need to learn how to use a credit card responsibly to be able to enjoy all of these benefits. If you think about it, we are to blame for our credit card problem. The card itself is not flawed. Everything boils down to how we choose to use it and how we react to the payment obligations that are expected of us after every use.

Although we are encouraged to lower our debts, statistics show that our debts are still continuing to rise. According to the latest data from the, the total debt amount by the end of 2013 is now at $3.1 trillion. Credit card debt (included in the revolving debt category) has also risen significantly in the last quarter of 2013. In quarter 1, the revolving debt is at $849 billion. In quarter 2, it grew to $851 billion and then increased to $852  billion in quarter 3. It jumped to $861 billion by the end of the the year. Most of the growth happened in December – just as expected because of the holiday spending.

These trends show us that paying off the debt completely still involves a very long journey ahead. It is advisable that you pay off any balance that you have before you decide on any more credit card transactions in the future.

5 uses for your credit card that makes sense

Despite these, did you know that there are certain credit card uses that actually make a lot of sense? If you consider it carefully, it even makes better sense than using cash – at least, if you learn how to pay the balance properly. Here are the 5 ways you can use your credit card the smartly.

Making online purchases.

Online shopping has grown to be a very convenient way to make purchases. It beats going to the store and fighting your way through the crowd just to get what you want. In some cases, the online prices are even lower than their counterpart in the store. reveals an increasing trend in online shopping. In 2010, the number of online shoppers were 172.3 million who contributed $228 billion in the overall consumer spending. In 2011, it grew to 178.3 million e-shoppers who spent $256 billion. In 2012, it grew even further with 183.8 million online shoppers who spent $289 billion throughout the year. Although the figures are not yet final, it is estimated that the 2013 online shoppers will total to 189.4 million. This growth will push eCommerce shops to improve their products and services – and that makes it an ideal place to buy things. If you want to join this trend, your credit card will help protect you and give you benefits too. Things like unauthorized charges can be reversed and thus protecting your money. You can even expect a stronger return and warranty policies – thanks to your credit card account.

Paying for big products or electronic appliances.

One of the options for credit card uses is for big and expensive purchases that takes too long to save up for. If the appliance or furniture really needs to be replaced and you cannot wait to save up for it, it is okay to use your credit card. But there are some things that you need to do. First is to check the warranty clause in your card. Most credit card companies offer extended warranties. Also, you may want to check if you can avail of a zero% installment plan to pay off that debt.

Renting a vehicle.

It will be very difficult for you to rent a car without a credit card. After all, this is the guarantee of the company that you will not run off with their car. While there are very few rental companies that will allow you to do so without a card, they will place a $500 hold on your bank account for 14 days. It will also involve a credit check. All of these will be unnecessary if you have a credit card. That convenience does not have any other alternative.

Financing your travel expenses.

Card holders can also benefit from this purchasing tool during vacations or other travelling events. In case your card gets stolen while you are away, you can simply call the creditor to ask them to freeze your account. That will keep the thief from completely stealing from you. Some cards also offer you travel insurance. In case you lose your card, there are companies who will send you cash and quickly replace your card within 24 hours. There are also certain travelling perks that you can enjoy.

Booking hotel accommodations.

Renting hotel rooms wrap up our list of great credit card uses. Just like in rental cars, booking a hotel room with cash will allow hotels to put a hold on your bank account. For some establishments, they will hold the amount that you are expected to pay for throughout your stay. That includes the room rate, phone calls, taxes and other incidental costs. It can cost up to $1,000 or more. And even if you pay it in cash at the end of your stay, the hold will not be lifted immediately. So if your expected bill is $1,000, you need more than $2,000 in your bank account.

All of these expenses are better off using a credit card but remember that you still have to practice being a smart credit card user. Make sure that you have a plan in place to pay off your card balances so it will not accumulate and become a big financial problem for you in the future.

Using your credit card for emergencies is not too smart

Some financial experts will advise you to keep your credit card for emergencies. While this may seem like a sound advice, you have to approach it with caution too. It is still important for you to save up for a cash emergency fund to be your main source of financial support.

Despite that, there are two emergency credit card uses that are acceptable.

  • When your emergency cash fund is inaccessible. There are instances wherein there is no ATM around or other sources for you to withdraw your cash fund. This is the only time for you to use your credit card. When you finally have access to money, you may want to pay off your card balance immediately.

  • When your cash emergency fund is not enough to finance what you need. Sometimes, your emergency situation demands a huge amount of money. If your cash fund runs out, your credit card can be a welcome relief. This will help ease your worries as you try to get out of your financial difficulty.

These are the only time that you should consider using your credit card for emergencies. It should not be an excuse for you to not save up for your emergency fund.

Credit card uses, regardless if it is advisable or not, should always be approached with a plan. With the exception of the emergency situation, you have to keep your card expenses in your budget. That way, you can pay it off as soon as possible to minimize, if not eliminate, the finance charges that can grow your money.

Emergency Credit Cards? 6 Reasons Why It Is A Bad Idea

road signsNobody knows what the future brings and it is for that reason why we have to be very careful about preparing for it. Some people may think that you are being paranoid when in truth, you are just being cautious. It is also being practical because there are many disadvantages of being unprepared for an emergency. When we say unprepared, we are mostly talking about not being ready financially.

In most cases, an unexpected event comes with a financial need. Whether it is an accident, an illness or any other requirement in your personal or work life, it usually requires you to pay a certain amount to get over it. If you are not prepared, the chances of you being in debt is very high. Instead of solving the problem entirely, you have just immersed yourself into another financial emergency.

This is where most people turn to emergency credit cards. Their inability to pay for emergencies in cash made it alright for them to use credit cards. While it may seem logical to do so, you have to understand that it will actually do you more harm than good.

6 ways that using a credit card for emergencies is a bad financial choice

In an article written by Dave Ramsey in his website,, he revealed an important truth about credit cards. He said that cash is better to use because you have an emotional attachment to it. That mean you will be more cautious in using it. When you use credit card, Dave Ramsey said that you are more likely to spend more because you do not feel the parting with your money. In fact, his article cited a McDonalds study that revealed how consumers usually spend 47% more when they use credit cards.

Even if you are using emergency credit cards, it will still work the same way. You will still experience a detachment when you pay for that emergency expense. But beyond that, here are 6 reasons why it is a really bad idea to use credit cards for emergencies.

  • A credit card is a loan. Do not think that just because your credit card is under your name, you are using your money. That is what makes people overspend through their credit. You have to understand that this is not an extension of your wallet. Every payment that uses your credit card is actually using the money of the creditor. You are just borrowing money. That means when the whole crisis or emergency situation is over, you have yet to deal with the payments of your credit card bills.

  • You can put yourself under so much debt. As mentioned in the Dave Ramsey article, credit will make you spend more. If you cannot pay for  your dues immediately, your credit card balance will incur finance charges. That will make your debt grow until you have paid it off completely.

  • You will not feel the need to look for alternatives to finance your situation. Since the credit card will make you feel like you have sufficient funds, you will not feel the need to look for alternatives to lower the cost you need to pay for. You have to understand that looking for better options should be a priority – regardless of how you intend on paying off the unexpected expense. You will not feel the need to approach charitable organization or similar companies that have programs to help you out.

  • Even emergency credit cards can be closed due to inactivity. You may be wondering why this is an issue. An emergency cannot be predicted. That means you can go for a long time not having an emergency. If that happens, you can have your credit card closed due to inactivity. These cards are usually automatically cancelled when there is no activity within 6 months. If you are not aware of this and something does happen, you may find yourself really unable to pay for that financial need – both card and cash.

  • Emergencies can strike one after the other and that can lead in accumulated debt. The opposite of the previous reason is you can have one emergency after the other. If that happens, the debt on your card can continue to accumulate even before you have the chance to pay for the previous debt. Do not let that happen by relying entirely on emergency credit cards. Your credit score may be seriously affected by this.

  • Your budget will be ruined. An emergency can ruin your budget because you have to input your credit cards payments into it. Depending on how much you credited to your card, you can spend months or even years paying off this expense. That will limit your budget even further.

The thing about paying off credit card debt is you will be wasting a portion of your money on interest rates. revealed in an article about medical bill nightmares that the credit extended for medical emergencies usually start out with a low interest. The example was 9.9%. But that will rise after the introductory rate to as high as 24%. Imagine the money that you will be wasting if you use your card for emergencies. And we all know that most of the expensive unexpected expenses are our medical treatments.

The better alternative to using a credit card for the unexpected

Obviously, the better alternative to emergency credit cards is growing your reserve fund. You want to be prepared to pay for these unexpected expenses in cash. But unfortunately, only 38% of Americans have an emergency fund. That is according to the data compiled by That means 62% of Americans do not have savings to deal with emergency situations. They are more than likely to depend on credit cards to help them survive a crisis.

If you are part of the statistic that does not have a cash emergency fund, you need to work hard to build up one. There are many benefits to relying on a cash emergency fund and here are some of them.

  • After the financial crisis, you do not have to worry about any additional payment and you can move on immediately.

  • You will not waste money on the interest rate.

  • You will be living a stress free life because you know that you are prepared for any emergency.

  • When tragedy strikes, you can concentrate on how you can solve it because you have the funds to back up any plan or solution that you can come up with.

Given all of these points, you know that you have to start computing your emergency fund target so you can work on your financial security. Growing your reserve fund to replace your dependency on emergency credit cards is simple but it requires some form of sacrifice from you. Naturally, you have to ensure that there is something left over from your income so you can put it aside in your savings account. You can work longer hours to earn more or you can cut back on some of your usual expenses. Either way will help you grow your emergency fund the fastest.

When is it okay to pay for emergency situations with credit cards

While we strongly advise you to build up your rainy day fund, we are not saying that you completely shun emergency credit cards. If you can only be a smart credit card user, you can really make this work for you.

What we are proposing is for you to have both – emergency cash and credit cards. But instead of prioritizing the use of your card, you turn to your cash first. If the need is great and you require additional funds, you can look at your card already for help. Here are important reminders before you use your emergency credit cards.

  • It has to be used for a real emergency only. That dress that you need to buy for a friend’s wedding is not an emergency. These include the car breaking down, an illness that has to be spent on or the pipes breaking.

  • You have to completely pay it off in the shortest amount of time. That way, you minimize the money you waste on interest.

  • Look for other options before using it. As mentioned, there are other ways for you to finance an emergency – you just have to look really hard for these options.

Be wise with your credit card spending so that you will have less to worry about in your llife. Here is a video from National Debt Relief to give tips on how you can get credit card debt help in case you have accumulated this debt already.

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