Despite what some people believe, credit cards aren’t magical nor do they represent free money. Although they can be extremely helpful when you want to make a purchase but are without without any cash on hand, or in other emergency situations where you find yourself in a financial pinch, it is important to remember that these cards come with a cost and need to be paid off at some point. In conjunction with this, to make sure that credit cards end up helping you rather than hindering you, it is vital that you know how to be a responsible card user.
They Should Be Used Sparingly
If you operate on a cash basis for the most part, then credit cards should be used only on rare occasions. This frees you from worrying over balances and sneaky interest rates that will eat your finances alive. If you are dealing with cash almost exclusively, then keep your credit card hidden inside your wallet or somewhere else where it will essentially be out of sight.
Reserve Them for Emergencies
Emergencies can occur at any time, and when they do, sometimes extra money is needed immediately. An emergency is a good time for the credit card to don its superhero cape and save the day.
Be sure you have an understanding of what constitutes an emergency, though. Forgetting your spouse’s birthday and rushing an online purchase is not an emergency; it is poor planning. Your finances should not pay the price because of your procrastination. Think of emergencies as being such things as two flat tires or a water pump that decided today is the day to blow. Emergencies can also be urgent medical situations, home repairs that must be done immediately, or old debts that have to be paid as soon as possible, just to name a few examples.
Is It a Need or a Want?
This should be a fairly routine question when it comes to using your credit card to purchase something. If you don’t have the cash on hand for an item that you would like to buy, but probably don’t really have to buy, then don’t be tempted to pull the old magic trick and flash the card just this once.
If you use your card in this situation, it will open a door that should remain shut and will basically give you permission to do this again and again. Before you know it, your life will be ruled by end-of-month statements and you will find yourself anxiously reading articles on how to get out of debt.
Whenever you are faced with a potential purchase, ask yourself if the good or service that you want to buy really represents a need (like an emergency item) or simply a want (a nonessential item). If you are honest with yourself, you already know the answer and can proceed with the appropriate action.
Get Stuck in the Details
A credit card should not be used as a casual tool unless your finances can absolutely afford it. And even if you have a good financial foundation, credit card abuse will quickly eat away at that foundation. Therefore, it behooves you to curb any tendencies you might have toward extravagance and watch your spending. Be aware of due dates and interest rates. If you don’t remain vigilant, all the little details assoiciated with credit cards can get you in trouble quickly.
Be wise with your credit cards and use them in a prudent, responsible manner. Your finances will thank you.