With the United States steeped in its worse recession since the 1930s, credit worries everyone with a wallet or pocketbook. Increasing layoffs, declining benefits and escalating co-pays, and depressed investments have everybody concerned, and many people are beginning to wonder how they will afford their bills. Swiping that credit card loses its universal appeal as consumers worry about being lost in a tornado storm of debt. Yet credit cards are not necessarily evil. They can be tools or weapons, depending on how responsibly you use them. If used right, credit cards can even pay you back.
Although they can be useful, they can also be temptations that can ruin your credit. The average American faces over $8,000 in debt. That’s a huge chunk of change to swallow, but it’s easy to accumulate without noticing. When you use a card, you hardly think about it because the transaction is electronic. Hand over cash, and you immediately feel the difference. It’s almost as if your wallet becomes so light it can float away on its own.
You don’t feel like you are spending money when you are using a credit card. Reality will quickly remind you, however, when you open that bill at the end of the month. When it comes down to it, if you can’t put the bill back to zero at the end of the month, you’re living beyond your means and digging a financial hole that’s not easily climbed out of.
Yet there are real reasons to use credit cards, but you need to keep it within your budget.
Benefits of a card
Credit cards provide electronic records of your money transactions each month. This makes it easy to compare and navigate expenses. You can adjust your monthly budget easier and see where it’s all going.
Credit card transactions are also insured. If you make an online purchase that suffers a security leak, you won’t be liable if someone buys a boat with your credit. Use a debit card, and you are responsible for any transactions, regardless of whether they were yours or not. Credit cards ensure a secure purchase.
You can also earn rewards like frequent flyer miles or get membership expenses to popular and exclusive groups and clubs.
Using a credit card wisely also helps you build your credit, but it’s important to be responsible. If you use a credit card to live beyond your means and rack up more than you can pay back, the card will rip your credit to shreds, making it difficult to later buy a house, car or other major purchase.
Rein Your Credit into Control
More than half of all credit card holders carry a balance every month. This means that most of us who have credit cards use them to live beyond our means. In these situations, credit cards are detrimental.
If you carry a balance, get it in control by making consistent payments beyond your minimum. Credit card companies try to trap you by making the minimum payment lower than what you actually owe that month, causing your debt to snowball into a boulder of a bill. You should devote as much as you can to the bill, especially if the card carries a high interest rate. You may want to consider amassing all your credit onto a single bill that caries a lower interest rate so you can focus your energies and cut it down to size.
Keep a zero balance
Once you’ve gotten the balance to zero, keep it there. When the bill comes, pay off all the debt you’ve accrued in a month. If you can’t, you’ve used the card beyond what you can afford to pay. Credit cards only build credit when we use them within our means. Your credit can easily get away from you. Keep it on a tight chain so you don’t get bit.
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