Credit Card Articles
Credit Card Usage Explained
How often have you seen someone going through their wallet searching
for a credit card in the checkout line- and were shocked by the number
of cards they had in their wallet? Credit cards can be used as a
form of identification when applying for a major purchase, or when
renting a car; and they can be used for convenient purchases that you
won’t have to pay for until a month after you buy them.
Except, that’s not how it usually happens. Typically, people who
have an abundance of credit cards use them frequently, and have to
carry a balance from one month to the next because they are unable to
pay each card off in full when the bills come in. So what happens
then? Credit card holders are being charged high interest rates
for each of their purchases, sometimes up to 24%! Credit cards
are habit forming. It is very easy to pull out a piece of
plastic, swipe it through the register and buy something you couldn’t
afford otherwise. It’s tempting to think that the money will come
later, and you’ll pay for it then. More often than not, the bills
are more than the money you have later to pay them with. A study
in 1999 showed that consumers in America used credit cards to charge
over $1.2 trillion.
Even with this kind of negative usage, credit cards, when used
properly, are a terrific source of financial convenience. The
trick is to not over indulge yourself when you use them.
It’s also helpful to keep only one or two credit cards available to you
at one time. Even if you receive a new credit card offer in the
mail every day, you should stick to having a general use credit card
(one that can be used for any kind of purchase), and one for
emergencies. An emergency credit card allows you the peace of
mind of knowing if an unexpected expense comes up that you have to pay,
but don’t have the extra money available to pay it, you at least have a
backup in the form of a credit card that will allow you to pay for it.
Using a general use credit card should be done with extreme
discipline. Select one that offers rewards, cash back or other
features that you can benefit from. Make your weekly purchases on
your general use credit card, from gasoline to groceries, and keep
track of your purchases so you know how much money you are using on the
card. That way, you will know when you’ve reached your spending
limit for each week based on the amount you have budgeted for such
purchases. Set aside money from your paycheck each week for your
credit card. When the bill comes in the mail, immediately send
out the check for the FULL AMOUNT. This avoids finance charges,
but has allowed you to earn interest on the money for the full month
that you kept it in your bank account prior to mailing the
payment!
When you use a credit card for your every day purchases with the
discipline required to keep your spending in check, you are going to
benefit greatly from the rewards programs and interest free purchasing
power you get when you pay off your balance each month in full.
You are able to keep higher amounts of money in your bank accounts for
longer periods of time, allowing the money to earn a little interest
before the credit card payment is due. You also are building a
strong credit rating by making purchases and paying them off each
month, and will help you when it’s time to apply for a mortgage or
large loan for a new car or boat or other high ticket item.
This article has been provided courtesy of Creditor Web. Creditor Web offers great
credit card articles available for reprint and other tools to help you search and
compare credit cards.
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