Smart Credit Card Use

Credit cards often get a bad rap, but they can actually be beneficial to your overall financial health. Smart use of a credit card can add flexibility and value to your budget while helping you develop or improve your credit. Experts and savvy credit card users agree that in order to avoid heavy interest fees or become too dependent on credit cards, you must manage your credit card wisely.

Choosing a Credit Card

With literally hundreds of credit card companies vying for your business, choosing the right one can be a daunting task. As you narrow down the list, consider these tips:

• Choose the lowest interest rate card you qualify for.
• Compare set-up, maintenance, and transaction fees.
• Choose perks credit cards that offer rewards such as free hotel stays or airline tickets.

Compare the various offers you are considering and choose the most cost effective credit card you can qualify for.

Budgeting for Credit Card Use

While you wait for your new card to arrive, take a good look at your monthly budget. By carefully planning credit card usage, you can avoid an unmanageable debt load. If you have existing consumer debt, make sure you take those payments into account as well. It makes sense to eliminate such debt as soon as possible, because multiple credit cards can indicate you’re relying too heavily on card use.

New Card Ownership

With your new credit card in hand, you may be tempted to take it out for an immediate “test drive.” Pause a moment and read through your credit card “owner’s manual”. All that fine print is very important. Documentation included with your card spells out the exact terms of your credit arrangement, informing you of important things such as:

• Interest accrual and rates
• Yearly maintenance fees
• Payment due dates
• Penalties for late payments
• Over-limit charges
• Legal limitations

Once you’ve read through all the legalese, be sure to take note of your account number and the customer service number and place the information in a secure place.

It’s also a good idea to set up automatic payment arrangements. Just one late payment can kick your interest rate into the stratosphere—avoid penalty-related interest hikes by taking your memory out of the loop and setting up an auto-pay plan.

Setting Some Rules

A new credit card can sometimes feel like a windfall, one we want to go out and spend right away. Keep your debt load in tight control and get the maximum benefit from your credit card by setting some of these rules:

• Use your credit card for emergencies only.
• Don’t lend your credit card to anyone.
• Guard your PIN and personal information.
• Plan your credit card use.
• Eliminate added fees by paying on time and keeping balances under the limit.

Keeping Credit In Check

Experts agree on the importance of paying off your balance monthly. A monthly payoff allows you to avoid most of the costs involved in credit card use, such as interest, late fees, and more. Plan credit card purchases wisely, allowing yourself plenty of time to pay off charges before they accrue interest.

Many credit card users who carefully pay off their balances monthly forget that fees can be added for exceeding your credit card limit. Fees are also collected for late payments, even if your payment is less than a minute past due.

When used wisely, a credit card can help you manage your budget while you build your credit rating. Smart use of consumer credit can make a credit card an excellent financial tool.