I
am a firm believer in limited or no credit card use. You
should only keep 2-3 credit
cards at the most, and those should be major credit cards.
Also, making the minimum
payment could prove to be disastrous. Some balances paid with
the minimum payment due
would take as long as 20-50 years to complete. Because of that,
when it comes to credit
cards, I feel you should only buy what you can pay for in 30
to 60 days. In other words,
don't run credit card balances long term.
Many major credit cards offer a small interest rate when
you first sign on, and then
increase the interest payment later, the increased interest
rate is sometimes as much
as two and a half times the original rate. These are just
some of the nuances of credit
card use.
So, when is it appropriate to use a credit card?
1. When you rent a car
Car rental agencies require a credit card on file to rent
a car. I witnessed a young
couple at a rental agency in line before me on one of my
business trips. They won a trip for two
to a popular vacation spot, including a rental car, from
a radio station.
When they displayed their winning information, showing they
won the right to the rental
car and vacation, the agent said this is fine, we will honor
it. The only problem is,
you still have to have a credit card on file. They did not
have a credit card.
2. Frequent flyer miles
Some people insist on getting frequent flyer miles with credit
cards. This is generally
not a good idea since the cards with frequent flyer miles
tend to have higher interest
rates. It can work if you pay off the balance right away,
therefore the interest rate is
not an issue.
3. Dispute a poor product
In the rare instance a store or company will not respond
to your complaints of a poor or
defective product, you can complain to the credit card company.
In most cases they will
run interference for you and solve the problem.
4. Split the payments on a large purchase
Occasionally you will need to make a large purchase, but
will not have the cash up front.
In this instance you can charge the payment and pay the balance
in 2-3 months. Try not to
go over 3 months. In the case you feel you need to go over
three months you may question if you really
need the item or save your money to purchase the item cash.
Credit card interest is expensive and debt snowballs. Use
credit cards or other debt only
when you have too. When you run up a balance, pay off your
credit card balance with actual
cash. Do not take out another loan to pay off a credit card
balance, which is a loan itself.
If you can’t make your monthly credit card balance
at any time, contact your credit card
company immediately, they want to work with you. If you are
addicted to using credit cards
or have a tendency to think credit is cash, don’t use
credit cards at all, for obvious
reasons of course.
Related Links
Minimum Payment Credit Card Calculator
Accelerated Debt Payoff Calculator
Lois Center-Shabazz
is the founder of MsFinancialSavvy.com and author of the
3-time award-winning personal finance book, Let's Get Financial
Savvy! ISBN #0971979502.
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