Be In the Know About Credit Cards Before They Own You

Credit CardsAccording 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:

Always Pay It Off

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.

Know The Rules

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.

Don’t Stick Your Head in the Sand

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?

Forbes (March, 2012)

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  1. Those credit card debt statistics are pretty insane. It’s amazing to think how much the credit card companies are profiting in interest each month. The problem is that people just don’t get proper education about credit cards. So they tend to use them when they don’t have the cash to pay off the balance right away. Sometimes it’s even for purchases that they fully know they won’t be able to pay off for a while. At the same time if they stopped to think that they are willingly paying 20% more for that convenience, I’m sure most people would reconsider that purchase.

    • You’re absolutely right about a CC education. They should include this in a HS curriculum and make it a mandatory course. The long term damaging effect is an uphill climb that some never overcome. Last year I happened to be in car salesman’s office and the guy next to me was taking out a loan at around 19%. Insane! All because he ruined his credit with bad debt.

  2. My wife and I are great about this — we put groceries on our credit card every month and then pay it off every month, we do this for the cashback rewards. Paying it off every month is key! Actually, I don’t even know our interest rate on our credit card because we always pay it off. I do call the credit card company about once or twice a year and ask for an increase to our spending limit. Not because we need it or come close to spending that much, but because I think it helps our credit score (the higher the limit the better!). But this all hinges on responsible credit card use and paying it off every month without fail and not late!! If you can’t handle it, like you said, cut up those cards and never look back.

    • TB, I use a similar strategy to you guys. I always pay the full balance off each month and maximize my rewards. When handled responsible cc’s can be a huge benefit.

  3. John,

    Along the lines of what TB said, my wife and I also use our cc’s when we make expensive purchase, like for airline flights, or when we buy a new refrigerator or washing machine. With our rental houses, these purchases occur with some regularity. That we we maximize our cash rewards.

    • That’s smart! Rewards are like free cash. I’ve been able to use mine for vacations, gift cards and with Discover you can use it to pay off your balance. It’s awesome!

  4. Its all about being n control of your expenses and having a good plan when using your credit card. If you just give in and swipe whenever you want to, well, good luck with that. you’ll be in debt in no time.

  5. This article attacks the issue head on. Credit card debt and the lack of education is where the real crime is. I have stated for a long time that schools should stop teaching our children items that will never be used and start teaching real world life skills once they get into their senior school years. The long term impact that this kind of teaching would have on kids of today would certainly prepare them and avoid the traps that we have all fallen for and our kids seem to be destined for the same fate.

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