Credit cards can be great things when it comes to making big purchases, budgeting your expenses relative to your income and assets, or even just making those every day purchases from gasoline to groceries.
Having a credit card can help you build much needed credit as you get older, as well as give you the option to pay later on what you purchase today. However, there are some important things to know about credit cards and when and how to use them.
Know What You Can Afford
Credit cards are a benefit to your financial planning, but only if you use them to buy what you can afford. If you purchase large goods on credit that you are unable to pay back later, you not only hurt yourself in the long run with having your products repossessed, you also hurt your credit score.
Make it a point to be sure that you can afford what you’re buying, regardless of when you have to pay it back, when you purchase goods using your credit card.
Understand The Interest Rates
Credit cards come with interest rates, so it is critical that you understand how they work and where you can benefit from them before signing on that dotted line. There is nothing worse that getting a credit card, only to find out that the interest rate is something you are unable to pay back in time!
Find out what you’ll be expected to do before you have to make a payment, and learn what the interest rates are – and how they will affect you – before you sign up for that credit card that seems to be too good to be true.
When In Doubt, Don’t Take It Out
In doubt about a purchase, or thinking that you might be cutting it close with that next big credit card purchase? Resist! When in doubt, leave the credit card in your wallet; either pay in cash that you know you have, or resist the purchase altogether and save the money instead.
There’s nothing worse than overextending yourself on credit, only to find that you are unable to pay back what you owe. So, make it a point to err on the side of caution and avoid overpaying all those credit card fees by leaving it in your wallet.
Credit cards, when used properly, are a financial asset and can help build your credit. But one wrong move with the card can land you in significant trouble. Avoid these issues by being smart when you buy on credit, and watch your financial future glow instead of sink!