Credit cards can seem to make life easier. You simply pull one out whenever you reach the sales clerk and instantly your purchase is complete. However, if you are not especially careful using credit, you could put yourself into a financially dangerous situation. Using a credit card requires a good deal of financial know-how in order to keep yourself from ending up drowning in debt. There are several things you need to consider when applying for and using a credit card.
Credit Card Interest Rate
Before you sign up with any credit card company, you need to know how much it is going to charge you in interest. Research the interest rates on a number of cards before you submit your first application. Choose the company that will offer you the lowest annual interest rate and make sure that the rate will not be increased after the introductory period.
Stick to One Card
When you have found, applied for and received your first credit card, leave it at that. Force yourself to stick to the credit limit available on just one card. This will teach you a lot about living within your means and properly managing your financial resources.
Keep Cash Advances to a Minimum
Credit card companies offer cash advances to their clients. This means you can borrow cash from your credit limit. It sounds like a great idea, but when you consider that the interest rate on cash advances is typically higher and that you will also incur extra fees for this service, you would be better off to use your own saved funds for any cash transactions you need to make.
Pay Off the Monthly Balance
If you pay off your monthly balance, in full, you will not be wasting your own money on unnecessary interest charges. Allowing the interest to accumulate from month to month forces you to hand over more and more money to your credit card company.
Use Your Credit Card for Special Circumstances Only
Keep your credit card for situations when credit is a necessity: emergencies and shopping online. This will enable you to keep your monthly balance low and to be able to pay it off in full without incurring extra interest charges. You will also develop good credit habits and in turn, a good credit rating.
