There are a number of incentives offered by credit card companies that entice the consumer to use a credit card for a variety of purchases on an ongoing basis. Combine this fact with uncontrolled spending habits, and you run the risk of suffering from poor credit card health. Certainly you can adopt spending habits that help you control when, why and how you use your credit card. At the same time, you can put into practice common-sense habits that will help you avoid out-of-control credit card debt to begin with.
First and foremost, read and understand the terms of your credit card, however monotonous and dry the reading may be. To the benefit of the consumer, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 compels credit card companies to use plain language in their contracts and statements. Take advantage of CARD, and know what you are agreeing to before you use your card.
Limit the number of credit cards you use, and avoid potentially costly balance transfers. The more cards you have and use regularly, the greater your risk of losing track of or control of your spending habits. Balance transfers used as a means to lower your interest rate and save money by shifting balances among many cards can actually cost you in terms of expensive fees and a poor credit rating. As well as balance transfers, cash advances also give the consumer a sense of spending power. However, you should avoid cash advances like a financial plague. For of all the “advantages” associated with using a credit card, cash advances can come with the highest fees.
You can avoid fees and heavy use of your credit card by establishing a personal emergency fund in advance. Before you are trapped in a vortex of credit card debt, set aside a percentage of your income that can be used in the event you immediately need money. By doing so, you can resist the temptation of applying for or using an existing credit card, subsequently paying a higher percentage to a credit card company.
Finally, while this tip may go without saying, do not lend your credit card to anyone. You are in charge of your credit card and ultimately responsible for the balance, regardless of who uses the card.
