Avoid bad buying practices and use credit cards to your advantage

The corner of a credit card with a Visa logo.

Photo Credit: MoneyBlogNewz/Flickr/CC-BY-SA

Safeguard your credit cards so your experience with them will be a dream come true instead of a nightmare. Many consumers crave expensive fashions or toys purchased the credit card company’s money. This practice is great if you are the lender, but it’s dangerous for customers. However, if you learn to use them to your advantage, credit cards can be beneficial to you and your credit report.

Dangers of doing business with big banks

Financial institutions make a living on the high interest customers pay. Debt can accumulate so fast that the minimum payment will be all that the consumer can afford. The minimum payment may be low, but it’s not to benefit the card holder. Many payment plans are designed to take the buyer more than 30 years to pay it off. Some credit card companies offer the option to skip a payment, but interest still accrues. When a special promotion offers “same as cash” within a certain number of months, all the interest will be added to the bill if a balance is still owed past the due date. These companies are not in business to run a non-profit agency to assist those who have financial needs. Instead, they aim to benefit their investors with huge profits. Don’t become a victim of lawful conduct that borders on unethical and benefits huge financial conglomerates.

Credit traps to avoid

Avoid making large expenses whenever possible on  credit cards. Many doctors offer a credit card to pay for their services. Owing for medical treatment can get you caught in a web of high interest and unnecessary stress. Automobile loans should be purchased through a bank that offers the lowest interest; don’t just automatically accept the dealership’s funding offer. Usually, credit unions offer the best rates and lower monthly payments. Some consumers have purchased homes with a cash advance taken out on several credit cards at one time. This practice does not make financial sense because interest rates on cash advances can be astronomical.

Pay attention to credit card terms

How does one budget and monitor the use of credit cards? Always know when the payment cycle starts and ends. If a payment is made too early, you could end up with a late fee added to the next billing cycle for non-payment. The fee could be enough to take a family of four out to dinner. Pay the bill off each month within each cycle. Note the billing cycle is less than 30 days in some cases.

Avoid bad purchasing habits

Avoid treating  credit cards as a second income. Use them as a convenience and for easy record keeping. Credit cards can offer protection that cash doesn’t. Items purchased with a card can be disputed more easily, and retailers know this. Get one credit card through your bank instead of several department store cards. Shop for the lowest interest rate, and read the fine print on every application. Whenever you get a junk mail credit card offer, call and ask the company to take your name from the list. Protect your personal information. It’s one of your major assets.

Less is more

One to three credit cards with a low limit can be beneficial because it shows stability on your credit history. Keep in mind that whenever a credit card is closed, it shows up on your credit report. You can use credit cards to your advantage. Good credit management practices can build a portfolio that financial institutions will use to approve loans when you want to buy your next car or home.

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