Credit Card: Dos and Don’ts

As now a days in most of us wallet credit card could be found, it is important to learn how to use credit card most effectively – preferably before one starts playing with it. I am pointing out here few do’s and don’ts of credit card, that I learned from my personal and friend’s experience.

Don’t:

• Use credit card for everyday purchase like: food, gas, grocery etc. As using credit card as a substitute for cash is a habit that can quickly lead to debt (bad debt).
• Get into the habit of making minimum only payment. Making minimum only payment every time unnecessary increases the debt burden. Moreover the rate of interest charged on credit card debt is also very high in comparison to normal rate of interest.
• Use your card to buy stuffs, which one cannot afford. As the probability of not able to clear the debt for these is high. This is because, the thing which one cannot afford today, it is difficult for one to afford it in a very short period of time (Credit Card debt are for very short period, on an average 15 – 45 days) . Never try to show off you are what you are.
• Opt out of a credit card, without analyzing, its impact on one’s credit score. One should avoid closing cards, still having any due balance or those that had a significant share in one’s credit history

Do’s

• Take rational decision before purchasing. Go for the needs rather than wants.
• Utilize not more than 25% .of credit limit. The amount of debt one has, plays an important role in determining one’s credit score. Moreover, lower balances are easy to manage.
• Always negotiate for lower interest rates, as due to huge competition in credit card market, credit card companies keep on revising the rate in new offers. One should keep a track on market practice and be sure of getting the best deal.