Judicious Use of Credit Cards Can Be a Benefit, But…

For the majority of the population,credit cardsrepresent something of a plastic savior. Many treat it as free money and a way to live outside one’s means. However, the concept is simple: A credit card allows a consumer to spend money orfinance what they do not want to pay on the spot so they can instead pay it within a 28 day cycle.

So why then, are credit card abuse statistics so staggering?

Because it’s human nature to want what you can’t have and credit cards give someone the power to spend what they can’t budget.

In order to responsibly use debt as an advantage, it’s important to understand the different options when dealing with a credit card.

The most popular type is a standard credit card. This is where an owner has a certain limit they cannot exceed, a certain APR, or percentage, they will be charged on balances at the end of each billing cycle.

They will then have roughly 28 days to pay off said balance to avoid an APR. There is a minimum payment required to stay in good standing.

The other of the absolute common credit cards is a premium one. These are options for: cash back, reward points, travel upgrades etc. Because of the additional perks, these cards usually require a minimum income, credit score requirements and higher fees upon insufficient payments.

The first important tip is to select the best card to fit your needs. If a cardholder is the type who makes large purchases because they have the money available to cover the money spent, they can consider a rewards card.

The idea is not to try to get free perks by spending extra money. The healthier concept is getting free perks as a result of doing things natural to your everyday life.

If your job requires a lot of traveling and thus you know you’re going to be reimbursed by your company, then considering a credit card with a higher APR and better perks is a wiser choice.

Just don’t mix business and pleasure by incorporating your private life purchases on the same card. The key concept is you already have the money to pay back, you’re just profiting off of the process.

Even with a standard credit card, which is less “bells and whistles”, the most basic key is to never carry a balance. Carrying a balance essentially means you pay more for everything you purchase because you are paying an interest rate on top of what you spend.

It makes no sense and yet is an alarming issue all over the world.

Treat a credit card like it’s coming directly out of your account and assume nothing out of the ordinary will bail you out. If you don’t have the money accounted for at the time of purchase, it’s not a guarantee it will materialize later.

Still, to play it safe, having a credit card with a reasonable limit (high limits are too tempting) and as low of an APR as possible should be the norm for most people. That 52 inch TV is a lot harder to purchase if your credit card limit is too low to purchase it.

Until someone has years of credit building under their belt, a steady income and a personal budget, they should not trust themselves to a higher credit limit.

Finally, even the ultimate sign of financial crisis won’t completely bail someone out. Bankruptcy may wipe away debt in most cases with a credit card, but it doesn’t remove it from a credit history.

In other words, after going through the process of bankruptcy, a consumer will no longer have to physically pay the money back, but the poor decisions can still haunt them for the foreseeable future.

Bad credit remains on your report for seven years under chapter 13 bankruptcy and 10 years for chapter seven.

Credit cards can be useful, rewarding even, and building credit and having a high credit score is nothing but helpful in today’s modern life. Just remember, no credit is better than bad credit and it’s important to have a financial game plan before committing to a credit card.

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Karen Jackson

Karen Jackson has always been passionate about technology. All the way through high-school she immersed herself in computers and web-design. Her ambitious nature helped her become a pro in Adobe Photoshop only by watching online videos and working with the program herself. This is also the program that she mostly uses in the creation of websites at her work-place. Technological innovation and gadgets that push the boundaries of what we are comfortable with have always fascinated her, so expect to see some weird gadget reviews coming from her.