Use It – But Don’t Abuse It

Getting approved for a credit card means that the financial services company issuing the card is offering you a loan for an amount up to a certain limit. If you don’t promptly pay off the amount you borrowed, interest charges will be added to the amount you owe. Interest rates, as determined by the credit card company, are variable. Interest charges are applied each month, so if you repay only the minimum amount required and carry a balance, your cumulative debt can balloon quite quickly. Before you know it more and more of your monthly payment is going just to pay the interest.

So, how do you ensure that you can enjoy the convenience of using a credit card and still steer clear of the hazards of impulse buying, overspending, and expanding debt? How do you avoid getting into a situation where your monthly expenses are greater than your income?

Here are Some Tips to Keep in Mind

• Avoid impulse buying and shopping as therapy. Carefully consider your purchases in advance. If you find this difficult, don’t carry your credit card with you.
• Maintain a budget so you always have a clear idea of what you can and cannot afford.
• If possible, pay your balance in full each month. When you carry a balance and pay only the minimum, you may be paying interest on the unpaid interest you were charged earlier.
• Don’t put everyday spending on your credit card unless you pay it off fully every month.
• Carefully review your statement each month. Be sure you know your current interest rate and how it’s calculated. Keep your receipts and check them against your credit card bill. Contact the credit card company immediately to correct any discrepancies.
• Never use your credit card for a cash advance unless it is a dire emergency. Interest rates and other charges on cash advances are usually much higher than the rates charged on purchases.
• Pay your bill on time.