Using a Credit Card Wisely
August 2nd, 2008 | by admin |
Let’s get one thing straight. Even though this article is about using credit cards wisely, credit cards still have redeeming qualities. One such quality is convenience. They come in quite handily when carrying larger sums of cash is out of the question, you are provided with a full record of your purchases, it is possible to consolidate payments with them and when checking out you need not give the cashier any form of ID as is the case with checks. Not to mention the fact that, in today’s society, sending overnight packages using cash, renting a vehicle with cash or purchasing airline tickets with cash seems to be quite a tedious-and in some cases-somewhat impossible task. And let us not forget that banks are quite adept at marketing credit cards as implements of freedom and as status symbols.
Think about this fact for a moment. According to Robin Holland, Senior VP for Equifax’s customer service operations, “If you don’t have the money to pay for an item now, you probably won’t have it after the credit-card bill arrives. We need to be wise about the use of credit. If you can’t pay for an item in a reasonable amount of time, you shouldn’t be charging it.” Unfortunately, people today see credit cards and credit as “free money” and are not fully aware that the bank will want its money back. You should look at a credit card more as an unsecured type of loan given to you by a bank which allows you to purchase services and goods with the understanding that you need to pay them back later. And hopefully you will be able to pay your credit card balance off each month because if you do not, and continue to make purchases, your interest rate will rise sharply and your balance will balloon out of control. Remember, your credit rating and overall financial health suffers when this happens.
And also be advised that, before committing to any credit card offers, you should check out the conditions and terms which determine overall costs of carrying that particular card. First off, don’t even take a second look at cards charging annual fees. If that particular bank feels they need to squeeze even more money from its customers, find one that does not. In fact, the majority of creditors really want to do business with you and will not charge you fees. Here are some other great ways to use credit cards wisely:
• Be advised that banks offer lower APR rates to begin with which can quickly rise to astronomical levels within a few months.
• Find out what the cards APR rate is. This stands for annual percentage rate. Creditors are bound by law to disclose this information to you.
• Periodic rates are charges applied to outstanding balances in order to calculate monthly finance charges within each collection cycle. They can really hurt you if you continue to let your unpaid balance build up.
• Variable rates are offered by some creditors and are linked to either interest rates or some other form of economic gauges. Which doesn’t seem to be a problem if you are constantly following such things. But with our busy lives and hectic schedules, does anyone really keep track?
• You should have one credit card with a manageable credit limit.
• Find out about transaction fees because banks will charge fees for exceeding your credit limit, making late payments or receiving a cash advance.
• Be sure to keep your monthly charges as low as possible. It is recommended that they should not be over 30% to 50% of your credit limit.
• Keep both your creditors phone number and credit card account information at home so if your card becomes stolen or lost you have quick access to all pertinent information needed in order to cancel your account. And if such a problem arises, the total dollar amount you are liable for is usually only $50.