According to Forbes (March, 2012) the average credit card debt for indebted households was $14,517, and for all households was $6,772. That is a daunting statistic to have to face, and it’s a reality that many people live with every day. I often wonder how much they know about credit cards. If you have a credit card it’s important that you take careful steps to avoid any of the pitfalls that can trap you in debt and keep you there almost indefinitely. I’ve heard and read about numerous stories of how debt shackled someone to the ground when they desperately wanted to be free of it to pursue a dream. It’ll also be impossible to start saving for your golden years if you’re tied down to debt.
Four Points to Know About Credit Cards:
This is perhaps the biggest pitfall, and as obvious as it is, it’s still one that many people continually fall into. If you buy something with your credit card, pay it off immediately. The minimum payment is what you have to pay, but you’re still paying interest on the rest of the balance. If you pay the entire balance it’s better for your credit, better on your debt, and it means that you’re free and clear from the second edge of the credit card sword. You need to know about credit cards and the difference between minimum payments and paying off the balance. If you can’t manage this then it be advisable to cut your credit cards up before they own you.
Don’t accept just any credit card offered to you. There are recommended credit cards to sign up for and there are ones you need to stay far far away from. If you have a credit card, you need to know all of the details about it. You need to know your maximum borrowing limit, what your interest rate is, what rewards you get for purchases, what your grace period is, and everything else that could affect your spending habits. People who don’t read the fine print can get stabbed in the back by it and end up carrying debt for years if they’re not careful. There’s a fine line. Which side are you on?
Always Ask Yourself If You Need It
A credit card isn’t cash. It will pay for items that you need, and it works great in emergencies where you don’t have the cash on hand to cover the necessary payment. But it always comes with strings attached. Before you use a credit card to cover something, whether it’s your car payment or a meal at a local fast food joint, always ask yourself if you’re willing to hold the strings that come with using your credit card. Think of future consequences. 20/20 hindsight is easy but sometimes what you’ll see is your worst nightmare. Don’t be looking back at a mountain of credit card debt you can’t pay off.
If you do end up using your credit card, and you do miss payments, or make late payments, contact your credit card company and inform them. Show them you’re being proactive, responsible and inform them of your situation. If you make them chase you they’ll be less lenient and less likely to work with you in the future. They’ll probably sell your debt to a collection agency and that is no fun for you. Ask anyone. This can be a major black mark against you and hold you back from attaining future loans no matter your credit score.
A Credit Card in itself is not a bad thing. When one can be responsible and know about credit cards they can actually help the economy grow. It’s when they go bankrupt or default on their loans that they contribute to the economy tanking. Be responsible and make smart choices before making a financial mistake. It’s much easier to be on this side of the fence then looking back wishing you were in different shoes. How much do you know about credit cards?