Using Credit Cards Wisely

Ideas to save money while using credit cards.

Credit cards are very valuable tools when used with care. Your credit card can be the most powerful budgeting and money management tool you own, but it is also a responsibility. Keep the following provisos in mind, when using a credit card and get the optimum out of that plastic.

1. It’s a good idea to start by checking the copy of your credit statement and making sure the information in it is accurate. Especially look out for the following facts:

•  Does the statement list your current and past addresses accurately? 
•  Any mention of loans or credit cards on your report that don’t belong to you? 

2. If you find errors, be sure to dispute them immediately with the company. 

3. Credit card companies charge a hefty fee if you don’t pay on time. If you do miss a payment, call and ask if the late fee and interest can be removed. Most cards will do this at least one time, if you ask.

4. Inspect your recent statements to double-check the interest rates. Many credit card companies entice you with low introductory offers that expire after a certain time period. You may find out that instead of the 1.9 percent you thought you were paying as interest, the rate has gone up, way up.

5. Another hidden cost is the annual fee charged by some credit card companies. Take stock of the fees you’re paying. If you have a credit card that carries a hefty fee, you may need to shop around for a better deal.

6. It’s important to read your bill every month to look for mistakes such as double billing, uncredited refunds for items you returned, charges that you didn’t authorize and other incorrect entries. If you find a mistake, contact your credit card company immediately. 

7. If you find that you’ve accumulated more debt than you’d like, you need to come up with a plan to pay off your balance. Figure out a way to pay more than the minimum due each month. If you owe a credit card company 5,000 at 18 percent interest and if you pay just the minimum every month, it will take you over 30 years to pay off the debt!

8. While you are at it, you might want to start by paying off the card with the highest interest rate first. 

9. It’s just too tempting to blow bucks when you have the card on you all the time. Reserve it for emergency use only, especially if you are trying to get out of debt. 

10. The 20-10 rule makes a good "rule of thumb" for understanding how much credit you can afford. The 20 refers to: never borrow more than 20 percent of your yearly net income (not including your housing or mortgage debt). The 10 refers to: monthly payments that do not exceed 10 percent of your monthly net income.

11. Make a list containing important information about each credit card you own. Include the account number and contact information, especially the emergency number to call in case your card is ever lost or stolen. Make sure your ATM card is on the list as well. Keep this in a secure place, only you should be able to access this information.

12. Limit yourself to 1 or 2 cards. Impulse buying can lead you to quickly run up the maximum on a card that will be hard to pay off, you might want to instead consider limiting yourself to 1 or 2 major credit cards.

13. Last and maybe the least, get a file/folder with multiple pockets and start filing credit card documents separately.

Its easy to overlook that you will be paying later while using credit cards, so use your cards wisely. Half the battle is won and you build a solid financial base for the future.