The answer? It really depends on you! If you know how to use them properly, they can do you so much good! If you let the credit card(s) get the best of you, then you’re doomed!
A lot of people have misconceptions about credit cards. Well, here’s one truth that probably not very many people know about credit cards: People who practice sound financial management enjoy the good things in life, even credit. Wise and smart people use the credit facility (credit cards) to their advantage.
Those who misuse the credit facility end up in “hell holes” … years and years of debt with compounded interest, a negative credit history, and years of sleepless nights.
In What Ways Are Credit Cards Good?
Remember the old saying on money being the root of all evil? That’s not really true! It’s not money itself that’s evil; it’s how money is used. In the same context, credit card per se is not evil; its how it is used that makes it evil.
Proper and responsible use of credit helps people build a strong credit history, which can serve them well for many years to come. People with good credit history easily qualify for a variety of loans at very reasonable interest rates. When a person has good credit history, it will be very easy for the person to get a loan for his dream home, an auto loan, for personal lines of credit, for emergencies, and even when applying for credit cards for everyday use.
Useful Credit Card Tips
Below are some relatively easy steps, which, when followed religiously, can help anybody achieve not only a good credit history, but ultimately, financial freedom.
If you really need to buy something using your credit card, be sure that you choose the best term available, such as low interest or zero interest for a specified period.
Pay bills promptly, preferably 2 to 3 days before the due date, to avoid late fees and keep finance charges, if any, to a minimum;
Always pay more than the minimum amount due each month. Doing this will decrease the total amount paid, and the length of time that it takes to pay the whole amount off. Always pay down debt quickly to maintain good credit practices.
Carry only the card that you use regularly. This will help avoid running balances in all your credit cards if you have many;
If you know that sometimes you get out of hand, especially when shopping (if you’re an impulsive buyer), leave your credit cards at home. Here’s a suggestion, if ever you find something that you really want to buy using credit, freeze your credit cards in a block of ice. While the ice melts, you have a chance to decide whether you really want to make that purchase; it will give you time to think things over.
Use a debit card instead of a credit card. It’s a lot different when you actually have to take out money from your account to pay for the things you want to buy than just swiping it using your credit card. The purchase may not be so tempting anymore specially is it involves a substantial amount of money.
One idea of good credit practices is to limit the number of credit cards you have to two (2) or three (3), which will hopefully prevent you from maxing out more than what you can actually afford and pay.
Always practice good records keeping. Keep a file for your charge receipts. This allows you to check store statements and credit card statements. It also gives you documentation if you need to dispute anything with your creditor. Always remember that they make mistakes, and to have records with you will be for your own best interest.
This is very basic: memorize your personal identification number (PIN). Never write nor keep your PIN number in your wallet or written on the back of your credit card.
Tear up carbons after every use to prevent credit card fraud.
Keep a list of all credit cards, including account information and phone numbers, in a safe place. This will make reporting of a lost or stolen card quickly. You may also scan and copy both sides of every credit card and keep the copies for documentation purposes. These may come in handy later on.
Budget your income well. Set aside 10-15% of your gross income to pay for your loans and debts. Ideally, 30% of your gross income should go to your rent or mortgage. Following a budget will assure that you are managing your finances well. Any deviation on this signals an imbalance, meaning something is wrong. When this happens, look at the “hole” and “repair” it.
Lastly, once your debt is paid off, put the 10% you saved for payment to your debts and loans into a saving account. Continue setting aside this money for your savings. If you do this, time will come you will have saved enough money that you can use for any project you might want in the future.