Thursday, October 12, 2006
Avoiding Credit Card Debt
Learn how to use credit cards wisely so that you don't get buried in credit card debt.
Credit cards can be a great thing -- they're convenient, can help build good credit if used properly, and are useful in emergencies. But they can be dangerous, too. Because you can charge more than you can afford and make very low monthly payments, the temptation to overspend is tremendous. That, combined with credit cards' extremely high interest rates, cause many people to spiral into debt. To avoid becoming one of the millions of Americans struggling under a huge amount of credit card debt, learn to use credit cards wisely. Here's how.
Don't Use Your Credit Card as a Loan
A credit card can be two things, depending on how you use it. If you carry a balance, it is a very high interest loan. If you make only the minimum payment (usually 2-3% of the balance) each month, you'll be paying off the debt for years and years to come and will pay a huge amount of interest. On the other hand, if you pay off the balance each month, a credit card becomes a very convenient way to purchase items and services without carrying around a lot of cash. Use your credit card as a cash substitute, not as a high-interest loan.
Charge Only What You Can Afford
Don't use a credit card to finance an unaffordable lifestyle. If you can't pay off the entire balance every (or almost every) month, then you are overspending. Use these guidelines to determine what you should and shouldn't charge:
You have cash in the bank to cover the purchase. If you have sufficient cash in the bank to make a purchase, go ahead and charge it. Then pay off the balance in full when you get the statement.
Credit cards can be a great thing -- they're convenient, can help build good credit if used properly, and are useful in emergencies. But they can be dangerous, too. Because you can charge more than you can afford and make very low monthly payments, the temptation to overspend is tremendous. That, combined with credit cards' extremely high interest rates, cause many people to spiral into debt. To avoid becoming one of the millions of Americans struggling under a huge amount of credit card debt, learn to use credit cards wisely. Here's how.
Don't Use Your Credit Card as a Loan
A credit card can be two things, depending on how you use it. If you carry a balance, it is a very high interest loan. If you make only the minimum payment (usually 2-3% of the balance) each month, you'll be paying off the debt for years and years to come and will pay a huge amount of interest. On the other hand, if you pay off the balance each month, a credit card becomes a very convenient way to purchase items and services without carrying around a lot of cash. Use your credit card as a cash substitute, not as a high-interest loan.
Charge Only What You Can Afford
Don't use a credit card to finance an unaffordable lifestyle. If you can't pay off the entire balance every (or almost every) month, then you are overspending. Use these guidelines to determine what you should and shouldn't charge:
You have cash in the bank to cover the purchase. If you have sufficient cash in the bank to make a purchase, go ahead and charge it. Then pay off the balance in full when you get the statement.
# posted by New Life @ 5:43 PM 
