Personal Finance

Credit cards are tools. But as all tools they need to be used correctly else you will spend more then you should.

1- Credit card are credit not cash this seems obvious for many but some still think it’s money available for spending and they can use it for anything even if they don’t know if they will have the money to pay for it. This is a big way to get in trouble. (Real necessity expenses are not in that category)

2- Many credit card charge interest from the first day for new purchase when you carry a balance from the previous month.

3- No payment needed.

This is a trick to get you in the loop in point 2. You will pay interest on all your purchase

4- Cash advance are pretty bad:

Interests are charge immediately

Most credit card charges a fee (often 1%) with a minimum fee. Good customer can call to get the fee wave

5- Balance transfer:

They have the same fee as cash advance

They are paid first then all spending made on the card will be at the purchase interest until the balance comes back to 0. Usually Credit Card company that makes attractive balance transfer; have a high interest rates and reduce interest rates packages are expensive.

6- Missing a payment: This is a big no no! This hurt your credit record

The banks are usually the issuer even if they don’t set it in your credit record from credit company for a couple of days late they keeps it in their own records and they use that correlate to your credit score to allow or denied mortgage for example

7- using credit card for “the grocery”:

We hear that one often what this means: Credit in economics is supposed to be used to leverage investments that should balance at least and even get better return then the loan. But that’s not the case with spending and “grocery” means spending. This is consider a bad idea since it doesn’t balance grocery. It will disappear but the debt will not.

Credit card should be used as much as possible as a method of payment where money is already set aside and budget to pay it in full each month. Credit cards are short terms credit a balance that goes for more then 4 months is wrong. Line of credit and others type of loans are made for mid term credit usually less expensive and will let you keep the no interest on purchase done. saving some money on the interest. Use the correct tool: Do you wash the living room floor with a toothbrush?