Using a Credit Card
Managing credit card use can be a real challenge. Here are seven rules you can follow to get the most out of your credit card at the least cost:
- Limit the number of cards. Using just one credit card will make it easier to keep track of what you are charging. At most, you might use two — one for everyday purchases that you pay off in full each billing period and one for occasional larger charges, such as an appliance, you might pay off over a few months.
- Charge only what you can afford to repay in full each month. If you have a card with a grace period and you pay in full and on time, using credit won't cost you anything.
- Keep your credit limit low and always keep your outstanding balance well below your credit limit.
- Keep records and track your spending. It is important to monitor your spending regularly, not just once a month when you receive your billing statement.
- Every time you're ready to use your credit card, ask yourself: "Is borrowing money really necessary, or can I pay some other way?"
- Never charge something for other people or pay for a group expense, even if everyone promises to pay you back.
- Avoid taking cash advances with your card. The interest rate on cash advances is higher — sometimes much higher — than on purchases. There's no grace period, so you owe interest from the time you withdraw. And there's usually an extra fee too.