Credit cards allow people to pay for their purchases with convenience without having to draw money from their bank account and carry a lot of cash in their wallet. While the upside of credit cards is convenience and security, the downside is the temptation to use them at will without thinking much of the capacity and ability to pay for the charges to be incurred. Paying thru credit is not bad at all if people would just keep in mind that the facility is there to represent the disposable cash that they own and not the money that they wish to spend eventually. So as not to fall into the easy trap of credit card debt, take careful note of these pointers:
1. Be fully aware of your credit terms
Don’t just read the fine prints of the terms and conditions. Have a clear understanding of what they mean and assess if you have the discipline and the means to follow them. Different credit cards have different terms and rates. You need to clarify with the issuing company any item that may be vague to you so you won’t get any surprises.
2. Use the card solely for convenience
Buy items that you can only afford to pay for right away. Some people who don’t bother understanding the rationale behind credit cards think that credit limits are equal to the amount of spending they can charge. Wrong! Whatever you cannot afford cannot be charged to your credit card.
3. Ensure that you settle your balance in full and on time
Paying only the minimum amount required will get you into big trouble eventually because interest and penalty charges will pile up. If you let this happen, your credit card debt will balloon, and you’ll see that the penalty and charges will cost more than the principal. Aside from paying the full amount, you should also make sure that you pay on time to avoid any late-payment charges.
4. Keep track of your credit card charges
Have a record of each of your purchases by referring to the charge slips given by the merchants. It is the best way to monitor your charges and not be caught off guard at the end of each billing period. It will also enable you to set aside payment and adjust your monthly budget as needed.
5. Avoid taking out cash advances
Credit card companies impose cash advance fees and other charges, so unless it is a life-and-death situation, do not use your card to get cash. Using this facility is a clear indication that you are in financial trouble and likely to be in a deeper mess if you would be unable to pay the advance on time and in full.
6. Maintain only one or two cards
Choose the best card for you. Be on the lookout for those with great payment terms and reward features. If you must maintain more than one card, then make sure that you work out a billing cycle that is different from your other card. In this way, paying for charges are easier to manage and control because you would have more leeway to budget your payments.
Remember, nix the usual mentality that having a credit card means more spending power. Rather, always think that paying through credit means having the cash to spend confidently.