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How to Use Credit Cards Wisely

People think that using credit cards is a great way to extend your spending ability. Well, it is and it isn't. Sure, you can spend, even if you don't have the cash handy. But the truth is, most people over use credit cards and under pay them. This puts you deeper into debt, you will have less cash available, which in turn makes you more likely to use your credit cards. It's an evil cycle you and end up spending much more.

Benefit to Using Credit Cards

There are great things that can come from using credit cards. You can accrue mileage and rewards, it can be a substitute for car rental insurance, you are often protected when making a purchase and it is great for building credit. Using credit cards can have benefits but you need to use them wisely. Here are some things to think about. See how you match up to these suggestions.

How Many Credit Cards Should You Have?

This is a big debate. Having a credit card is good for establishing and maintaining a good credit score. Some live by the 1 credit card rule and others say it is a terrible idea. Having only one credit card makes managing the bill much easier. But if you max out on the credit limit – it can hurt your credit score (and you won’t be able to use it anyway). By having multiple credit cards you run the risk of missing payments and having to pay interest and penalties. That’s not a good idea either. For me, what worked best is having 2 credit cards but only using one and keeping the other as a backup.

Pay On-time

If you don’t pay your credit card bill on time, you run the risk of extra charges – interest and penalties. Some banks let you set up automatic payments. As long as you have enough money in your account to cover the credit card payment each month, this is a great way to make sure you payment is made on time.

Pay More Than The Minimum

You think the credit card companies are doing you a favor by letting you pay the minimum due. They aren’t. By just paying the minimum you are still paying interest and this not only adds up quickly but higher debt, particularly on credit cards, can ruin your credit rating. Pay off as much as you can each month.

Be Wary of Credit Card “Sales”

With some stores if you use their credit card for a purchase you can get an addition 15-30% off. While this seems like a great idea, many people end up spending more than they would have otherwise, don’t pay their bill in full, and after interest is added they pay much more than originally planned. It is OK to take advantage of these sales, but only if you pay your bill in full.

Do you have any credit card tips to share?

Photo Credits: Pixabay


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