Just ask yourself: is the credit card work for me or am I working for the credit card? Most people’s reply to this question will depend on how they treat their “plastic friend” as credit cards are often known. As many people with huge credit card debts will tell you, they didn’t realize that things were so bad until too late, because most credit card companies try so hard to make themselves seem like a charity. Well, take it from me, they aren’t.

However, this is not an anti credit card campaign. They have their benefits – in the USA, for example, if you want to hire a vehicle, you must have a (major) credit card. But, think about this situation:

You get an offer in the post that sounds great, maybe it’s a new television or refrigerator. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and buy the item right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the remaining balance (typically 2 percent) per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only $10 will come off the $2,000 you borrowed!

Does it sound worrying? Well, it doesn’t need to be. The moral of the tale is to use the credit card very, very carefully.

Credit Cards Dos and Don’ts

There is a lot of truth in the advice that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your head. And you would do good to remember the following too:

Dos.

1] Always plan for the purchases that you need and those that you only want. You need the essentials, but you just want everything else. The ability to differentiate might assist you plan more wisely.

2] If you are caught up in financial difficulties, it’s always a good idea to talk to the credit card supplier who might re-schedule your repayments. If you simply default, that only builds up an unfavourable credit history for you and you could find yourself being refused credit in the future.

3] Unless it is an emergency, staying within your credit limits will help you a lot. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.

4] If your letterbox is full to the brim with details on credit cards that have better offers than you are currently receiving, you can always approach your issuer for a better deal. They want to retain your business, so they will hear you out.

Don’ts

1] Do not use your credit card to purchase household items. It is very expensive in the long run.

2] Do not only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The more quickly you are able to pay off the debt the better.

3] Do not use the credit card to buy things you can’t afford.

If you are considering swapping or getting a Credit Card, have a look at the free advice on our website about using Credit Cards wisely. Click here to get your own unique version of this article with free reprint rights.

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