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Remember to Use Your Credit Cards Wisely!It’s tough to manage credit card debt, particularly when you first get your credit card in the mail. If you’re like most people, your mind fills with ideas of all the purchases you could make that you’ve always wanted – a new car stereo, maybe some new home furnishings, or finally getting around to that vacation you’ve promised yourself. The truth is credit card companies count on these spending impulses to lure you into costly interest rates and over-limit fees, so the smartest thing you can do is develop spending habits that will get you the things you want without costing you your credit and your hard earned paycheck.
If you’re new to credit cards, the smartest thing to do is to make all your purchases on them and pay the card off completely at the end of the month; the key here is to spend less than you make so you don’t get hit with big interest rates. If you continue to do this with one or more cards over the course of several months, credit card companies will continue to increase your limit and perhaps even lower your interest rates. At this point you’ve got the credit card companies right where you want them – you get decide how much interest you pay and how you want to finance your purchases.
As you’d expect, this method takes an awful lot of discipline and mastery of budget planning. It’s important to remember that you’re treating your credit card like your checking account, and that you absolutely must pay off your balance at the end of each month in order for this technique to work. Do not attempt this method if you are already in debt to other lenders; instead, focus your free cash on getting them paid off so they will send positive reports to the various credit bureaus.
Try not to have more than three or four credit cards at once, and remember to stay on top of each one by checking their balances monthly. Though the card issuers may be different for each card, they all report your payment history to the same credit bureaus, so if you fall behind on one it will severely reduce your chances of gaining additional credit limit spending or lower interest rates on the others. You may want to start small and stick with one credit card until you get the hang of it, and then expand to two or more credit cards as you get more comfortable with the process.
If your spending gets out of control, remember that paying the minimum payment is also an option, though you will begin to accrue interest on the principal that was not paid. In this case it would probably be best to discontinue the use of your credit card as your primary source of payment until you can figure out what went wrong and you’ve paid back all the money you owe on the card. At that point in time you can start over and take comfort in the fact that you’ve avoided the credit card trap that most Americans fall into.
Above all else, remember that good credit and good credit card spending habits take time, and that limit increases and low interest rates are the product of several months (if not years) of disciplined spending habits. If you stick to your guns and stay on top of your monthly credit card bill you have nothing to worry about - you’ll be a master of the credit card game in no time.
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