Credit Cards

Credit Cards

When you need to book a flight, rent a car or you have an emergency like a car repair, credit cards can be a lifesaver. And that's exactly the kinds of things all adults need credit cards for. Follow these guidelines on how to use credit cards wisely.

Be Smart When Using Your Credit Cards

When you get your first credit card, it's a very exciting time. All of a sudden, it seems like a whole new world is opened up to you--a world without limits, without boundaries. Unfortunately, you're usually pretty young when this happens, so if you're not wise to the world of credit and the evils that lurk in the shadows, you can get sucked in. Next thing you know, you're deep in debt and looking for a way out. That's why in high school Credit 101 should be a required course.

Credit card companies, as you are probably well aware, will give you high limits, and the monthly minimum payment is usually only about 2-4% of your total outstanding balance. It sure sounds attractive when it comes to going shopping. You can buy a new iPod and a bunch of new clothes and only pay a small amount for them each month. Sweet!! But too many times, we don't read the fine print. Chances are you're paying 18% or more on that outstanding balance, and often a finance charge on top of that, and only a fraction of your required monthly minimum goes towards paying off your outstanding debt. Then you keep using your credit cards, your balances get higher, and your monthly minimums get higher. Eventually you're maxed out on one card, so you get another and repeat the same vicious cycle. And the credit card companies love you until you start missing payments, you're maxed out or you're overextended--that means you've been extended all the credit that credit card companies think you can pay back. The joke is on you though, because chances are, your minimums are so high that they're taking a significant chunk of your monthly take home pay, and the credit card fat cats just keep getting fatter. All because you weren't properly educated on the smart way to use credit cards.

To avoid this whole vicious cycle, follow these guidelines:

• Only use your credit cards when absolutely necessary.
• If/when you use them, pay them off in full each month.
• Try not to have too many open accounts.

This makes it sound so simple, and once you're in credit card debt, it's hard to live by these rules. However, once you've worked hard to pay off these debts, these rules are much easier to live by because you never want to be a victim of credit card debt again.

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