Whats in your wallet? More importantly, do you know how to correctly use it and no I am not referring to that unopened Trojan from your high school glory days, throw that away and buy a new one already. I am referring to that credit card or credit cards as the case may be.
With credit cards come huge responsibilities, the biggest of which is making sure to pay on time every month lest you incur late fees and interest on late fees. It really doesn't take long for that little debt to become a hole of debt too deep to easily dig yourself out of.
Many people fail to even read the contract when applying for a credit card and fail to realize that the low interest rate promised when you first get the card is often accompanies by a clause stating that failure to make timely payments can mean an increase in the interest rates as high as 24.99% in many cases. This can be imposed the first time your payment is late.
Failure to manage your credit card wisely can also have a large affect on your FICO score and in the long run, maybe even years after you pay the card off, affect you being able to get that new home or car. A large part of your FICO score is based upon available credit, if your maxed out its not good and if you have too much available credit it can also be a hinderance as many lenders view this as a possible way for you to over extend yourself. I personally recommend carrying no more than 2 credit cards and only using those when you have the money to pay cash.
There will be emergencies(read past posts about setting up an emergency fund) from time to time that will pop up and you may even have to charge your way out of it. In these circumstances, you should do everything you can to insure paying this accrued balance down as fast as possible.
Credit cards can be a life saver at times but should be used wisely and not for frivolous items such as buying that $200 dog figurine from the home shopping network.Through proper control, you can and will improve both your FICO score and your own financial stability. Until the government institutes a mandatory test of ones intelligence prior to being issued a credit card, remember nobody can control your spending but you. Shop Wisely and Good Luck!
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2 comments:
Great post it is always nice to offer credit card advice as so many people are lost these days when it comes to them.
I on the other hand have done something different, I use my one, no annual fee credit card for everything. This way I avoid bank account fees and earn points quickly toward free stuff. Now having said that the balance is never more than I can afford as it gets paid every month automatically on time. I realize this is great but only if you are very conscious and disciplined with your money.
And as for what is in my wallet....no cash.... yes some have criticized this and say what about emergencies, but I have to say in our day and age today I feel pretty secure and content with my decision :)
does that mean sites like http://www.minimegifts.com are contributing to the problem?
I can see the wisdom in your post about using credit cards - my girlfriend says cash only and no credit cards (except for extreme emergencies...no buying the latest dress is not an emergency).
Great advice, just a shame that so many people will misinterpret what you type because it comes across so differently when read from a computer screen.
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