Credit cards are one of the great conveniences of life. No check-writing, no digging through cash and correcting a cashier’s change. Just a quick swipe and you’re on your way. And today, everything from parking meters to soda machines accepts them, so it’s easier than ever to forsake paper money in favor of a helpful magnetic strip.
Like anything good, of course, credit cards require good judgment. If you don’t manage them correctly, they can be very destructive. Here’s how to make sure your credit cards are tools that simplify your financial life instead of weapons that slay your money:
Start With The Right Card
There are lots of legitimate reasons to use a credit card, and everyone has different ones. For business owners, it may be for daily gasoline use and for meals to entertain clients. People working for the government may use them for purchasing workplace necessities. Other consumers may use them as a tool for financing major purchases.
All of those reasons are good, but all those consumers don’t necessarily need the same card. When you set about the process of getting a new card, you want to research a site like HighYa that offers objective reviews of many different cards, so that you can find the one that benefits you most. For example, a card that offers airline miles for purchases is worthless if you never fly, but a cashback card will be less appealing to the world traveler.
Remember That Cards Aren’t Money!
It can be very easy to see a credit card as interchangeable with cash. After all, the sales associate typically asks you which of those two options you’re using.
But credit cards are not cash, they’re debt. Like any debt, they can be helpful or harmful. Credit cards should be viewed as a snooze button for expenses; they can delay them to a time when they’re more convenient, but they still should be paid on time or they can become a real problem.
Security is important as well. It’s not a good idea to use debit cards for online or over-the-phone purchases because these instruments draw money directly from your bank accounts. Using a credit card as a go-between gives you assurance that at worst, someone can add to your balance with fraudulent purchases. By working with the card company’s security department, you will be able to avoid liability for these fraudulent purchases.
Be Strict On Your Policy For Using And Paying Credit Cards
Don’t finance a latte, okay? It can be handy to swipe credit cards instead of debit cards because it gets irritating to constantly enter tiny purchases in a check register. It’s tempting to just use the credit card, then figure on paying the credit card later with a single transaction.
That can be just fine. You can build rewards and improve your credit by making purchases and then paying them off before interest accrues. But if you don’t pay off the full amount by the due date, the interest will accrue right up to the ceiling. Before long you have a huge balance and you’re making minimum payments, which can exponentially extend the time it will take to pay it off–with a massive interest bill to boot.
When you use them, plan on paying them immediately upon receipt of the statement, and return that balance to zero every single month. That’s only possible if you are using the card only to buy things you would be buying anyway, or for workplace expenses that you know will be reimbursed. Never let the credit card entice you into spending money you know you won’t have!
Credit cards are a bit of a status symbol. The flashiest ones, gilded in gold or platinum, draw the awe of those around you when you pull them out to pay. Or at least you think so. And it does take respectable income and good credit to get the high-end cards. But whatever plastic you carry, it can gobble up your income and credit in a hurry. Use them in the right way so that they aren’t using you.