Credit Card Pitfalls

These days it is a common occurrence to see people using credit cards every day to pay for their purchases, whether it be gas for the car, lunch out, prescriptions, groceries, clothes or whatever. It makes life so much easier, because you don't have to carry huge wads of money around with you, just in case you see something you need to buy on that particular day. In fact, you don't even have to have any money at all the day you use your credit cards! The majority of stores, restaurants etc accept payment by credit card, so there really is very little need to use money to pay for anything these days.

However, (I bet you were waiting for that!) you do have to be aware that everything you buy on your credit card has to be paid for when you get your next credit card statement, and if you do not pay the balance in full by the due date, then you really pay for it in the form of interest payments! 

You have to remember that credit cards are not free money. You have a responsibility to pay back the money you borrow, and to do so promptly, and to remember that it is your responsibility, not your parents or spouse, or the next door neighbour! You use the card, you pay the bill. So, when applying for a credit card, make sure you know about all the charges, like

• the finance charge, which is interest charged on the unpaid portion of your monthly bill;
• the annual membership fee, if any;
• the late payment fee, which is charged if you fail to pay at least the minimum fee of your monthly bill by the payment due date. And be aware that the rate charged for this can be high.

If you have credit cards, make sure you get organized, and stay that way, paying your credit card bills on time, in full if possible. If you pay by cheque and mail in the payment, make sure you allow for the time this takes to be delivered and processed. Nowadays, with so many bank transactions possible online, it is much easier just to pay the bills as soon as they arrive in your home, by just going online for a few minutes. If you can get in the habit of doing this, then, if you are carrying a balance, you will reduce your finance charges a little by paying it at once. If you have to wait for your next pay cheque, then as soon as this has cleared your bank, pay your bills. It feels good to get them paid, and removes some of the worry of receiving late fee penalties by forgetting about them.

Here are some tips to help you manage your credit cards:

• Be credit card smart. Apply for a credit card that suits your needs at this time, ie a low interest rate if you expect to be carrying a balance for a little while, or a rewards credit card if you are hoping to treat yourself later and will be paying your credit card bill in full every month.
  
• Use your credit cards wisely. Only buy the things on credit card that you would be paying for in cash, if you carried cash around with you.
  
• Use credit cards, only if you are sure you can repay it.
  
• Try to avoid impulse shopping on your credit card.
  
• Use credit cards for a cash advance only in emergency situations - the interest charged for a cash advance is high!
  
• Seek credit counseling if you see financial problems beginning.