Some people think having a credit card simply encourages over-spending. However, a credit card can actually be an important tool in successful budgeting. Credit cards can also help you establish or re-establish, depending upon your circumstance, your credit rating. There are a couple ground-rules for the proper use of a credit card:
- Pay your credit card debt off every month. This is a cardinal rule. If you allow debt to accumulate that you cannot pay off, than you’re wasting money paying interest. Check out the interest rate on your credit card, you may be surprised. It’s really expensive. Do note that some credit agencies will allow you to purchase a fairly expensive item, and not pay interest, as long as you pay off the debt within a specified duration, such as 6 months. This is a great deal, so long as you pay off the debt strictly by the deadline. Meanwhile, in the interim, you should be earning interest on that money that you’re saving!
- Pick a credit card that offers you the greatest advantage. Some credit cards offer aero miles, some credit cards pay dividends, and others provide free-of-charge travel insurance. Check out the competition, and select the card whose benefits are going to be useful to you.
- Keep your credit card bills on file until you receive your credit card statement, at the end of the billing period. Make sure there are no mistakes on your provincement, by cross-referencing the documents. You can then discard your credit card bills, unless you need them for some other purpose.
* You can use your credit card to pay some bills which re-occur every month. You can also do automatic withdrawal at your bank, of course. The advantage of using a credit card is simply the advantage of extra aero-mile points, dividend bonuses, and so on. If you have to pay the bill anyhow, why not use the bill to gain an advantage?
* Keep it simple. If you have too many credit cards, it might be to lose track of your budget. Therefore, you may only wish to have 2 credit cards.
* Consider your limit. Even if the bank allows you to increase the limit, for example, from $5000 to $8,000, you have to think about whether the increased limit will encourage needless spending. On the other hand, if you are going on a trip, you may want the limit raised in the event of an emergency cash call.