Jeremy Richard writes about credit and debt and the importance of following a budget and saving for retirement.
Credit cards present a highly convenient way to make purchases and earn rewards, but if you’re not careful when you use them, you can end up getting screwed. The effort to protect consumers from abuses seems like a never-ending struggle, which implies just how bad things can potentially get for any given user. The fine print is usually too long to read and too abstruse to understand – and believe me, that’s exactly what many credit card companies are counting on. To avoid getting screwed with your credit cards, take a look at these six tips.
- Pay Off Your Balances
The best way to avoid getting screwed with your credit cards is to live a balance-free life. If you currently have balances, formulate a game plan for getting them in the rearview mirror for good. Create a personal budget, reduce your spending until it’s lower than your income, and send in the difference each month until your debts are paid. Once they’re gone you’re going to start seeing a lot more leftover in your checking account each month.
- Be Careful With Balance Transfers
Credit card balance transfers can be a great way to alleviate the effects of high interest as you pay your debts down. Simply sign-up for a card that offers a no-interest introductory period, transfer your balances to that card, and start racking up the savings. Just make sure you don’t transfer more than you can afford to pay off by the time the promotional rate ends and don’t use the card for purchases while you’re paying it down.
- Don’t Pay Your Bills Late
Because of recent credit card legislation, the fee for making a late credit card payment is capped at $25 for the first offense. However, that’s not all you have to worry about. Fail to make a timely payment and you may be assessed a penalty APR which can be as high as 30%. Try signing-up for a website like Manilla and you can receive text message or email reminders when your bills are due.
- Use Automatic Payment With Caution
Using automatic payment plans to pay your credit card bills is a viable option, but be sure you still monitor your credit card statements every month. If you don’t, and if your bill is paid automatically, you might miss an unauthorized purchase or overcharge.
- Don’t Open Up Too Many at Once
Even if you find a wealth of new credit card offers with attractive cash-back deals, don’t jump on them all at once. Although you may earn solid money in the short-term, each card you open generates a hard pull on your credit report and yourcredit score is negatively affected as a result. Limit yourself to opening one or two new credit cards per year at most.
- But Never Close Any
On the other hand, when it comes to older cards you don’t use anymore, don’t make the mistake of closing the credit cards. Keep those lines of credit open, use them every few months for minor purchases, and make sure you pay the bills in full and on time. You want your total available credit to be as high as possible, as that benefits your credit score.
Using credit cards effectively requires a degree of personal responsibility. If you find yourself missing payments or overspending, you can always reduce your risk by using cash or a debit card. Not getting screwed with your credit cards is important, and if you simply can’t get your head around ways to avoid some of these errors, stick yours in a drawer and use cold hard cash.
What ways can you think of to avoid getting screwed with your credit cards?