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Credit Card Do’s and Don’ts

john j bowman jr accountant - credit card

Credit cards are like keys; they open doors to affordable mortgages, nice cars, low-interest loans, and ideal rental options. As useful as these thin plastic cards are, though, they aren’t without their dangers. When over- or thoughtlessly used, credit cards can cause consumers to spiral deep into debt, and ultimately have a negative impact on a person’s ability to borrow money. To (safely) get the most out of a credit card, you need to use them properly. Here are five do’s and don’ts to using credit cards.

 

Don’t Carry a Balance

 

Credit card companies charge high monthly interest rates. While paying the minimum balance may seem like a great idea, it won’t do much to bring down the balance. It’s important that credit card holders pay as much money as possible each month. Depending on the card’s interest rate, the average card owner will save anywhere from 10% to 29% a year in interest.

 

Use a Credit Card Instead of a Debit Card

 

Again, there is nothing wrong with using credit cards. The issue is the irresponsibility of credit card use. Credit cards and debit cards are not the same. Credit cards offer a greater level of fraud protection. In situations where fraud occurs, it’s easier to get a refund with a credit card.

 

Avoid Cash Advances

 

Cash advances may seem like a great idea. However, cash advances do not have a grace period. An automatic fee is added each time a person uses this card feature. Also, cash advances come with higher interest rates than the rest of the credit card balance.

 

Don’t Use All of the Available Credit

 

The amount spent on a card should not exceed 20% to 30% of the available credit limit. Using any more than this will affect the FICO score. Even if the balance is paid off in full, card issues do not like when borrowers reach their card’s credit limit.

 

Take Advantage of Balance Transfers

 

Credit cards with high annual percentage rate cost consumers a lot of money. One way to alleviate some of these costs is by taking advantage of balance transfers. Some cards allow consumers to transfer the balance without paying a fee. The advantage of transferring the balance to another card includes paying lower interest fees.

 

Credit cards are useful. When used correctly they are convenient financial tools. Using these cards irresponsibly can lead to financial issues that may last years. Hopefully, these tips will help consumers avoid the pitfalls of credit card usage.

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