I personally know two people who went bankrupt almost exclusively because of their credit cards. Both of them had multiple cards, both of them accepted the constant offers to increase their limits and both of them lost their houses doing so. Now credit cards aren’t evil things waiting to get you. In fact they can be really handy, especially for big purchases. Yet, they are dangerous and they can ruin you financially if you don’t use them properly. So, if you’re looking into getting a card or you already have one, follow these tips to ensure you use your card and it doesn’t use you.
Have only one card. That’s right just one. You don’t need two or three or four cards. If you need more money then seriously ask yourself why. Having multiple cards only confuses debts, makes it more difficult and stressful to pay off the bills and means your much less likely to notice hidden fees and chargers. Keep your debts consolidated in a single card and increase the limit of that card if you need it.
Do not fall for those shiny bank letters that tell you you’re a “valued customer” and can “increase your limit”. Only ever increase your limit if you really have to. This is because the banks don’t love you, they don’t even like you. They want your money. So whenever it looks like they’re doing something nice, think twice. My mother worked for a bank and she told me that they only do this to put people in more debt. Promise yourself that you’ll stay at your current limit unless you get a significant pay rise. You’ll save yourself a lot of hassle in the future.
Shop around. There are some really great low interest cards out there but often people just sign on with the card offered by their bank. Do your research and find the lowers interest rate you can. Don’t go for a card with a higher rate that offers lots of bonus points and rewards. These points accumulate very slowly and the special rewards are not usually so special. Go for low interest always.
Make your payment in full every month. You do not want to accumulate interest. Interest is the devil. The way to stay ahead of it is paying those bills in full each time you get them. If you find yourself unable to make payments, immediately stop using the card, make some sacrifices (not going to the movies for a month, not eating out) until your financially stable again, and then pay that debt. A lot of people fall into credit card debt but still keep using their credit cards! That’s honestly the dumbest thing you can do.
Only use for emergencies. I once got into trouble with my credit card because it felt like free money. I felt rich! So I swiped that card to take my friends to dinner, I swiped it at the movies, at the supermarket, at Starbucks. What a horrible shock I got when I went through 2000 dollars in a month. Not so much except that I was an unemployed university student at the time. Whoops. I learnt the hard way to only use credit cards in case of emergency. If you do not have the cash reconsider the purchase.