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If you're young and just starting out credit cards are certainly
convenient and can help you establish a good credit history,
which will be important when you need to make major purchases
down the road. However, carrying a credit card comes with big
responsibilities. Here are some tips on how to use your credit
card wisely.
Choosing the right credit card
When selecting a credit card, you should consider your own
needs. For example, if you're going to be carrying a balance
(not paying off the entire bill each month) then it is
imperative to seek out the lowest interest rates that you can
find. But you may be limited by a few circumstances, one of
which is your paycheque. Some credit cards require a minimum
income level or charge an annual fee.
High limit credit card could be a recipe for disaster. Signing
on the dotted line is fun. No money comes out of your bank
account and no cash comes out of your wallet. Shopping has never
been so easy. That's why when starting out the best credit cards
are the ones that have low spending limits, unless you can
afford to pay for any of the charges that are made on it.
Just about all credit cards offer some type of incentives such
as rewards points or cash back incentives. This is done for
obvious reasons. The most common of which is to entice the
cardholder into using it more often. Overall it is a pretty good
deal to receive rewards for credit card charges as long as you
bear in mind that this is not free money. Whether you realize it
or not, you have already paid for those points.
Managing your credit card account.
Managing your account online is a great feature; just about
every body has access to the Internet and can easily access
their credit card statements.
Studying your credit card statement
You'll receive a statement that details what you've bought and
what you need to pay. The purchases you've made will be tallied,
just like on a bank statement. You'll need to pay attention to:
· The amounts - Make sure your purchases are listed correctly by
comparing the amounts to your own purchase receipts. Doing this
will help you understand where your money is being spent and
help you adjust your spending patterns. · The balance - If for
any reason your statement seems a lot bigger than you thought it
would be, you may be heading into a danger zone. Keep your
balance within a range you can afford to pay off every month.
And remember to save some credit for emergencies. · The minimum
payment - You need to pay this amount each month toward the
entire outstanding balance. Making substantial payments every
month will help you keep the interest under control. · The
purchase interest - This is how much you're paying on purchases
that have not been paid off in full by the payment date.
Whenever you carry a balance forward from the previous month,
you'll pay this monthly interest. · The payment date - When you
are busy and responsible for many bills, it's easy to forget
when everything is due. However, paying bills on time is crucial
to maintaining a positive credit record. Over time, it could
mean the difference between being approved or denied for other
credit, such as a car loan or a mortgage. Many credit card
companies advise making payment a few days before the specified
payment date to ensure receipt. Another option is to pre-pay
your bills using telephone or Internet banking.
Staying out of the danger zones
It's a good idea to avoid the following, despite the temptation:
· Cash advances - You'll pay interest on a cash advance from the
moment the cash is in your hand. You may also be charged a
service fee. Cash advances are great for emergency cash but
avoid using them as an income supplement. · Hitting your credit
limit - There are many reasons why hitting your credit limit can
be dangerous. If you don't have the money to cover your
purchases, you will definitely feel the discomfort that a large
balance brings. · Impulsive purchases - Think about the purchase
and why you are buying. Do you really need it? Don't let the
ease and convenience of credit be the driver for purchasing the
item. · Overusing the card - Credit cards aren't a substitute
for saving and budgeting. When you can't afford to go to the
movies, don't think of your credit card as a saving grace.
Use Your Credit Card as a Tool
A credit card can be a tool that you use to your advantage. If
you play your cards right you'll prove to creditors that you are
a person who can take care of business in a mature and
responsible way. And a few years down the road, you'll have a
good credit history. Now that's impressive.
About the author:
Carmin Olivier is the webmaster of www.findyourcreditcards.com
where you can find "Tthe best US credit card on the internet! If
you're looking for good credit card deal visit
www.findyourcreditcards.com
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