As a consumer of course I have a credit card, at one point in my life I even had 5!! It was becoming real issue being in so much debt, I really didn´t know how to deal with my situation.
You've probably heard that consumer debt is at an all-time high, meanwhile your savings rate is lower than ever before. You realize that the commodity and ease of online shopping is just a click of a button and Its almost impossible to shop online if you don´t have a credit cards, this just adds to the national consumer debt. You are well aware that running a balance on your credit card and paying the interest rates that come with it is one of our most time and effort consuming tasks, becoming itself a real financial problem. But the offers of new “low interest” credit cards just keep filling not only your mailbox but your inbox as well.
Still, credit cards are almost a basic necessity nowadays in our life, and it is extremely important to understand how to use them wisely. It is unpractical not to have a credit card (not that you cannot live without one), but it is more than prudent to limit the number of cards you have (as I mentioned at one point I ended up with 5!!), and the best thing you can do is to pay all balances in full every month so that you don´t get stuck paying interests.
But we are not infallible; from time to time we have ended with credit card debt, so here are some ways to keep your credit in check:
1. Don´t be fooled by the “promotions” , You can easily take advantage of frequent-flier miles programs , but always remember that nothing is free and that interest payments on a high balance can quickly turn “free miles” into miles of debt. Let’s suppose that your card gives you a dollar per mile, carrying a debt of 25,000 may get you a plane ticket and a free trip, but it will also saddle you with $4,500 in yearly payments of interests, that´s assuming an 18% annual rate.
2. Always keep your eyes open and look closely at credit card offers before you sing. It´s obvious that most interest rates will be in effect for only a few months. But there may be (and most likely will be) other catches as well like other fees when making a late payment, even if it arrives only a day after you were due to make it. Also, low initial rates sometimes may only apply to transferred balances, and you may get charged a fee for making the transfer. Always check to see whether there is an annual fee (like membership), or charges for exceeding your credit amount or for closing your account.
3. Avoid amazing grace period, if they will you outstanding grace periods were you won´t have to pay a dime, when this periods end you might have to pay up accumulated dimes that quickly turn into dollars. What you need to look for is a provision that says you will never be charged interest or fees as long as you pay your bill in full by the due date. But be aware that some cards have no grace period, calculating interest from the moment you make a purchase, while others give you only a limited time or grace period after making a charge before interest start accumulating.
4. Always, and I do mean ALWAYS! Cancel cards you no longer use or need. If you forget or don´t, they'll show up on credit reports, and that maybe a problem if say you are applying for a home mortgage since banks or loaners may be reluctant to make a loan to someone who has a cumulative credit card limit of $50,000, $100,000, or even more.
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