I’ve been seeing so many posts about the ‘cash only’ system. While excessive spending with credit cards has created debt for many, it doesn’t mean having or using them in general is bad. After you examine your annual free credit report, here are a few tips on how to keep your credit card usage under control:
- Use Them Wisely
There are great benefits to having a credit card such as establishing a credit history, being able to book items such as airline tickets, or for emergencies. The problem arises when people have the ‘I’ll just pay it off later’ mentality. Debt accumulates when you begin to see available credit as extra cash.
- Find the Best Offer
Not all credit cards are created equal. You’ll want to do some research to find the best credit offer available. If possible, try to transfer your existing balances to a low interest credit card with no annual fees. Be careful with this though as many lenders these days will charge 3% or a $25 to do this, causing more harm than help.
- Pay Off Your Monthly Balance
Unless you pay it off right away, any outstanding purchases will cost you more than what you originally paid for them. That’s just not smart shopping. Of what benefit is it to get free shipping and 10% off when you’re paying 23% APR?! So only buy what you must and if you will have the funds to cover it before interest starts accumulating.
- Limit Balances
If you carry a balance on your card, try to make sure it does not exceed 1/3 your credit limit. When you go above that, it may reflect back only your credit score.
- Less is More
As you pay off or consolidate your debt, try to close some of your accounts. If possible, keep only your oldest accounts and those with the lowest interest rates. Having only 1-3 accounts open and in good standing will aid in bettering your credit score and future lending options.
In my family, we prefer to use plastic to keep better records of our spending. We even put some recurring monthly bills on a couple cashback/reward cards, though these are added to our budget to be paid off right away. This gives us an extra $40 or so each month. Others I know have used this method with cards that offer airline rewards, scoring them free flights. Using credit cards can be beneficial as long as you teach yourself to use them responsibly. Once you over-spend with credit cards, it’s very difficult to get back on track without outside aid.
Hopefully these tips will help reduce what you owe and therefore lowering the stress you might have in worrying about how to get out of the red.