Credit Card Habits and the Recession

With all of the hoopla over the credit card crunch and the present state of the economy, many consumers are not sure about using credit cards during this difficult time. They wonder if using their credit cards during a recession will have a negative impact on their own credit situation. So, what should you change about your credit card habits during this time of recession? Here are some tips and points to ponder

Know The Consequences

If you continue to use your credit card in this economy, you will need to be keenly aware of the repercussions of carrying over a balance each month. Credit card companies have become especially diligent about tacking on late and missed payment fees and, especially as of late, have demonstrated the real impact of being tardy with your payments. Credit card holders who already have a record of risky payment and purchase behaviors can be red-flagged and charged a higher interest rate with one false move. It is the best practice to pay your credit card bills in full, leaving no balances to carry over to the subsequent month.

Credit is Not Income

If you are in financial straits already, it is important that you do not use your credit card as a supplemental source of your income in order to make ends meet. Doing so can put you even farther behind financially and your risk penalties and other expenses associated with late payments on your credit card bills, leaving you to drown even further in debt.

If you find that you are opting to charge daily living expenses, it may be time to look for a better paying job or a supplemental income. If you don’t have the money to pay for incidentals like milk, bread, and gas, you don’t need to dig your financial hole deeper by running up credit card balances you can’t pay each month just to get by. Take a second part-time job or inquire about getting an increase in your current pay if you are secure with your job. The economy is in a tight spot right now and it may not be easy to find a new job but there are other things you can do for extra cash, such as childcare, yard work, and other odd jobs that match any skills you have.

Know Your Limits

Now is not the time to charge your credit card to within an inch of its limit. Credit card lenders are paying close attention right now, scrutinizing the habits of their cardholders and if they notice your credit cards are always nearly maxed out, they might very well “roll back” your credit , meaning they will reduce your overall credit limits whether you want them to or not. If you are not paying attention and are unaware of the changes to your account, you can go over the limit quickly and be subjected to high penalties and fees for going over your credit limits on the card. If you don’t read your disclosures and monthly statements each time you receive one in the mail, you can ruin your financial situation all too easily.

Using your credit card during a recession is only “okay” if you are confident you can repay the balance before the end of the grace period on your account. With so many consumers at risk for layoffs and permanent job loss, you can’t always have the confidence to know for sure your income is stable. Use your credit card during the recession, but use it wisely. Learning good credit spending habits now will be a great lesson learned for when times aren’t so tough.

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This entry was posted on Friday, February 6th, 2009 at 3:29 pm and is filed under Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.