How To Use A Credit Card Wisely
Need to know how to use a credit card wisely? Using a credit card takes a lot of discipline because of how easy it is. Credit cards offer instant gratification, which can be addicting and detrimental. While credit is a necessary asset these days, it is also a necessary evil that needs to be controlled.
- Get a credit card with a low APR. It is important to get the lowest interest rate possible, because the interest rate determines how much you will be charged for borrowing money. Interest is the cost of borrowing and if you have a lower rate, you will be charged less. A good interest rate is anywhere between 4-9%. 11-14% is more common with new borrowers. The better credit you have, the lower your APR will be.
- Pay your balance off every month. Don't let a balance linger on your card for more than a couple months. It can easily spiral out of control and you will end up paying more for the item you purchased. You don't want to end up paying $100 for a $15 pizza. This can easily happen when you charge something small, and take a long time to pay it off. Debt snowballs, and you can find yourself covered.
- Don't use cash advances or convenience checks. The interest rates for using cash and checks is always higher than the purchasing rate. It is best to not know your pin number and to shred all convenience checks to avoid any temptation.
- Don't use credit cards to finance fun. If you want to take a trip to the Bahamas, save up for it instead of putting it on a credit card. A fun purchase can end up costing you twice as much in the long run (or more). If you want to buy yourself something fun, like a trip, a new television, computer, concert tickets, etc., then save up for it. The end will be so much better when you've worked hard for it, and you completely eliminate the stress of having to pay for the fun thing for the next couple years because you put it on credit.
- Stay in control of your credit. You are responsible for the credit decisions you make. Use credit only when you need to make a big ticket item, and pay it off as soon as possible. If you find that you need the credit to make ends meet every month, then consider other lifestyle changes that can reduce your monthly expenditures. Be in control, and don't abuse of this simple and powerful tool.