Use It But Don’t Abuse It

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When you are approved for a credit card, the card issuer is offering you a loan for an amount up to a certain limit. If you don’t promptly pay off the amount you borrowed, you will be charged a certain amount of interest. Interest rates are variable and are determined by the credit card company. Interest charges are applied each month, so if you repay only the minimum amount required and carry a balance, your cumulative debt can balloon relatively quickly. Before you know it more and more of your monthly payment is going just to pay the interest.

“Money often costs too much.”
Ralph Waldo Emerson

So, how do you ensure that you can enjoy the convenience of using a credit card and still steer clear of the hazards of impulse buying, over spending, and expanding debt? How do you avoid getting into a situation where your monthly expenses are greater than your income?

Here are some tips to keep in mind:

  • Avoid impulse buying and shopping as therapy. Carefully consider your purchases in advance. If you find this difficult, don’t carry your credit card with you.
  • Maintain a budget so you always have a clear idea of what you can and cannot afford.
  • Keep your credit card balance at zero or as low as possible. When you carry a balance you are actually paying interest on the unpaid interest you were charged earlier.
  • Don’t put everyday spending on your credit card unless you pay it off fully every month.
  • Carefully review your statement each month. Be sure you know your current interest rate and how it’s calculated. Keep your receipts and check them against your credit card bill. Contact the credit card company immediately to correct any discrepancies. Pay your bill on time.
  • Never use your credit card for a cash advance unless it is a dire emergency. Interest rates and other charges on cash advances are usually much higher that the rates charged on purchases.