How to Use Your Credit Cards Wisely

Generally, you will hear about two categories of people when it comes to credit card spending philosophy. There are those who have racked up a serious amount of debt because they use their credit card without thinking about the consequences of the bill later in the month. On the polar opposite are those who pay cash for everything and would not even come close to a credit card with a ten-foot pole.

The truth is credit cards are not the enemy – irresponsible spending habits are. There is a smart way to use credit cards. Having credit card discipline is important to maintaining good credit. In another article, I discuss some of the benefits of using credit cards.

A wise credit card spender will look at the statement each and every month.  Look at the charges and compare them against receipts, if you have them.  If you do not have your receipts, be sure you are aware of any charges that do not look familiar.  Many charges for online items will have a phone number you can call to dispute the charges.  If you never look at your statement you may miss erroneous charges.

Today it is very easy to sign up for a fantastic trial offer for a product or service.  Often times people will forget that after the trial is over, they will automatically get billed.  If you do not check your statements as the above step mentioned, you may not even be aware of the monthly charges.  A wise spender will track when membership trials end, in case they wish to cancel.

Smart credit card spenders will pay off the balance every month, so no interest is ever charged.  If you are careful about this, you can get an interest-free loan every single month.  This is a wise way to use your credit card, but you have to be very disciplined when it comes to paying off the bill each month and on time, which leads me to the next wise use of credit cards.

If you are even one day late, a credit card company will charge you an exorbitant late fee. If you do this once, go ahead and call the credit card company and give them you sad story of how your dog ate your statement, and they may remove the charge. But, if you do this regularly, you probably won’t get so lucky.

These charges can add up quickly if you are not on top of your bill. NEVER be more than 30 days late or it will make a huge ding in your credit score. If you have to set a reminder email – most credit companies have this option on their website.

It is not wise to only pay the minimum balance each month on your credit card.  Depending on your interest rate, this is a futile effort in paying off the balance. If you have a high balance, you need to pay as much as you possible can or the interest will prevent you from making any progress.

You could be paying more interest than principal on a high interest of say 18%.  Think about it, if you only pay $40 on a credit card with a balance of $2000, more than half of that is going towards interest.

This seems like a common sense thing a consumer should be doing.  But, too often with a simple swipe of the card, it is easy for a consumer to forget how much has been spent that month.  Then when the $3500 bill comes that month with tons of little charges, it can add up quickly.  Then you are left with a bill you may not be able to pay off.  You get stuck making many of the mistakes mentioned above.

Credit cards are not necessarily the enemy, as long as you are a wise consumer and utilize good debt management.  If your credit card debts do get out of control, look into debt consolidation to consolidate all your credit card debts.

Credit cards have successfully minimized the use of carrying around cash and become one of the most convenient ways to make purchases. If not used prudently, a consumer may find him or herself in a huge mountain of debt.  But, if used wisely, they can make your purchasing habits convenient and simple.