Have you ever noticed just how much of a double edged sword credit cards are? When used properly, credit cards can give you a huge advantage in life, and help you get ahead and do the things that you need done. However, if they are used incorrectly, then credit cards can severely damage your credit, and make life impossibly difficult for years. The trick of it all is to learn when to use credit cards, and when not to use them. Here are a few simple guidelines that you can use to help ensure that you are going to use your credit cards wisely.
- Use only when necessary. One of the more common causes of credit card problems is people using a credit card for anything and everything that they can think of. If you end up using a credit card for every day purchases (such as clothing, food, or even gas) can easily end up costing you more money than you would believe. Between having to repay what you spent (because you will have to repay it) you will also have to pay a little extra due to interest. Instead of using a credit card use cash, a debit card, or even a check if you can.
- Don't max it out. A good rule of thumb to keep in mind is that you should keep your credit card usage within a total of 1/3 of the max. This will allow you to have something in store incase of an emergency, and allow you to pay off the balance a whole lot quicker. In addition, this will also help prevent you from making an unnecessary purchase, and keep you from spending more than you can pay back too easily.
- Pay off as much as possible. Never, ever, ever settle for paying only the minimum balance. Doing this will only help out the credit card company, and drag out the time and money spent on repaying what should be a relatively low amount. The thing about paying the minimum amount is that most of the payment goes towards interest only, leaving a vast majority of the principle untouched. The longer that you go with the minimum amount, the more time interest has to build up, effectively making the minimum payment relatively worthless.
- Only buy things you need. Ideally you should only use a credit card to purchase things that you need, and not the things that you want. Learning the difference between wants and needs can be a difficult lesson for some people, but it is one that needs to be learned. Do not use a credit card as an artificial means of supporting a lifestyle that you cannot afford. If you do, in the end it will come back to haunt you.
- If you run into trouble, let the card know. Everyone has financial problems now and again, and it is really nothing to be ashamed of. However, if you do run into a problem you need to be as proactive as possible. This means that you need to contact the credit card company as early as possible and let them know the change in your financial status. Oftentimes you can renegotiate your terms if you are proactive, and don't default on what you owe.