April 8, 2008

Credit Card Smarts

Posted in debt, obstacles at 5:45 am by kimsan23

Do you really need a credit card? Credit cards or plastic money is definitely an avenue to numerous spending temptations. You pay using plastic, you initially do not feel the strain on your budget. A few years back, I was deep in credit card debt. I didn’t know how to use it all too well and I ended up using one half of what I earned (which wasn’t much at that time) to pay off my card debts. Luckily for me, I always paid on time and had an excellent credit standing. Still, the hassle of having to pay a debt every month, the pressure of having to earn enough to pay a debt and the need to provide other basic necessities just made me go nuts at a certain point.

Define the purpose of you having a credit card:

1. My primary purpose in having a credit card is to keep myself from carrying a lot of cash on my person. It’s dangerous to have lots of money at one time.

2. I want to establish a good credit ranking with my bank so that if I would need to take out any loans, I’d get a speedy approval.

3. I would have the capacity to buy things online.

4. I can also buy things on installment, and most of the time– with zero interest as long as I pay on time.

5. I can use my credit billing and payment record to apply for my own phone line, cable, internet and other services you may need or want to avail.

6. I have something to use in case of spending emergencies like hospital ER bills etc.

As soon as I cleaned out my old credit card debt (taking side jobs here and there as well as making lifestyle changes read Dealing With Debt) — I’ve decided to follow some simple credit card spending rules.

1. Assign fixed expenses to your card like utility bills, groceries and other constant spends. This will help you to put aside money for these predicted expenses so that you can pay for them in full when the card bill is due.  This is also a great way to earn credit card rewards points!

2. For big purchases, always check your financial record to see if you can afford to put them on installment through your credit card. Check for interest and other payment plans before buying. Make sure that you have the income to pay for the installments.  Zero interest is the best!

3. Always PAY ON TIME to avoid late fees.

Do not:

1. …spend money that you do not, and will not have in the next 3 months.

2. …buy compulsively.

3. …always pay the minimum balance.  This will ruin your cash flow because interest charges will pile up.

4. …max out your card on shopping sprees if you do not intend to pay it all off immediately or in big chunks.  You might need emergency credit and not be able to use it.

And if you owe money to a card company. DO NOT HIDE.  Hiding will get you into trouble, but being transparent and striking a deal with them will help you pay your debts.  Hiding will result in your having a bad credit record.  When you apply for a new card or for a loan — you just might get denied.

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Looking to compare credit cards?  Click here!

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2 Comments »

  1. Carlyn said,

    If you also have the option to carry utilities on your card by auto-debit, you’ll save on having to make trips to the bank to pay for each individual utility, plus, you never have to worry about going over the due date. Credit cards can work for you, instead of the other way around.

  2. kimsan23 said,

    That’s true! Thanks for the tip! 🙂


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