Credit cards are a very popular part of todays society. Unfortunately, for many, the first introduction to the wonder of credit cards is not always the right introduction. There is a lot of factors and mathematical equations involved in credit card usage. From understanding how interest rates are calculated to how the minimum monthly payments on a credit card are constructed, first-timers are often overwhelmed by the amount of information they should process. Some choose to ignore it all together and just sign up for every credit card offer they receive in the mail. Both actions are equally common and can be equally detrimental to your financial status.
As with many things in life, if you do not know the rules, you can not be expected to play the game very well. The last thing you want to do is lose the game and wind up in serious credit card debts you can not get out of. As is proven in light of the recent economic woes of the nation, too many people did not take their credit card responsibilities seriously enough or at least make them a priority; and now they find themselves at the mercy of the credit card companies and the government, looking for a solution to their credit nightmares.
The rules for responsible credit card use have been around for some time. Unfortunately, not everyone has been made aware of the rules before finding themselves in trouble. The rules are basically pretty simple and provided you make a concerted effort to keep your finances and your credit score on the right track, it should not be difficult to establish good credit and keep it that way.
Here are some of the basic rules for using your credit card responsibly.
- Research the credit cards thoroughly before applying for the one that best fits your lifestyle.
- Set limits. Do not spend more than you can afford. Keep your balance at least within 30% of your credit limit. Maintaining a low balance will keep your credit score in good standing because much of your score is determined by the overall amount of debt you have.
- Make purchasing decisions much like you would if you were dealing only with case. Do not allow a credit card to affect your decision about impulse buys. Credit cards are not free money. If you can not afford it in cash, you have no business making the purchase. Make a habit of determining the difference between the things you truly need and the things you simply want.
- Exercise your customer rights. As you establish yourself as a good customer with the credit card company, you have the right to ask for a reduction in the amount of interest you pay on the card. Not every request will be approved but there is also no harm in trying to get the reduced rate.
You Should Not:
- Overspend. If you are buying only what you have the cash to buy you should have no problem making payments over the minimum amount due each month. Do not get trapped in the cycle of paying only the minimum required amount or you will quickly become consumed by debt and soon find it impossible to pay off balances in full.
- Use your credit card for every day purchases such as clothes, groceries, or gas in the sense that it becomes a substitute for using cash. Unless you have a special rewards card that gives you cash back for using it at the gas pump or the grocery store, it is better to leave your credit card at home. If you do use the credit card regularly for purchases, always stick the cash equivalent into an envelope and use it to pay your credit card bill each month.
- Apply for or maintain too many credit card accounts. On the other side of that, you should not close out too many accounts without first determining how you will be affecting your credit score. Never close an account with an existing balance or end your relationship with a credit card company that significantly impacts your credit score for the positive.