Whether you’re getting one for the first time or already learning how to manage debt, credit cards can be extremely complicated. If the recession has taught Americans anything, it’s that credit companies, banks, and even department stores are not their friends, and most cards are designed to gouge you for annual fees, interest, late fees, and more. You have to be pretty smart to stay on top of it all. Still, it’s important to have credit cards if you want to establish credit, rent a car, or simply secure funds for a rainy day. A 2013 report by ABC News says only about 45 percent of Americans have a larger amount of savings than credit card debt, with that number rising to 59 percent for those that make less than $30,000 per year. Increasing your savings is one way to be a responsible credit card owner. But there are plenty of other ways to avoid wrong turns and massive debt, as long as you follow some simple rules.
1. Don’t Make it Easy to Steal from You
Plenty of credit card users don’t realize how sensitive their card information really is, and they’ll hand over their card to waiters or give out their card number over the phone without a second thought. Did you know that 70 percent of credit card skimming is a result of waiters overcharging you? When dining out, it’s sometimes safer to use cash or at least pay close attention when the bill hits your account. Lending your card to family, friends, or children is a bad idea, too. Over 25 percent of identity theft is committed by friends and family, and even if you think it’s crazy that someone you’re close to could do such a thing, it’s also very possible they could make charges you don’t know about. Letting your son or daughter loose with a card is almost surely going to cost you. As many American sitcoms have taught, kids simply don’t understand the way credit works, and they won’t be too broken up about buying things on the spot that they seemingly don’t have to pay for.
2. Crazy Fees and How to Avoid Them
Your credit card and your debit card are very different things. One of them isn’t supposed to be brought out on every occasion. While you’re at it, stop using your credit card at the ATM. Cash advances can be murder on your personal finances. With zero grace period, you’ll be charged a high percentage from the moment the cash is in your hand. Avoid further credit card fees by paying your bill on time – that way you’ll avoid $30 or more every month and keep your credit in good standing. The best way to avoid credit fees is to have a card that fits your lifestyle, because there are all kinds of offers tailored to certain kinds of consumers. Cards that waive late fees, foreign transaction fees, and annual fees abound if you know where to look, and if your statement is simply too high, not shopping around online at sites like Kanetix.ca could be the biggest mistake you make. The credit card market is competitive, and lower fees plus great rewards programs are out there if you take the time to look.
3. You Must Pay More to Owe Less
Paying only the minimum payment can add up to some massive financial losses you simply can’t afford, not to mention it can take 20 years or more just to pay off a few thousand dollars. Why do you think the average credit card debt per household in America is greater than $15,000? APRs are so high, using your credit card for anything but dire emergencies can make a permanent dent in your credit if you don’t fully commit to paying it off as soon as possible. That means taking the extra $50 you would spend on a night out and applying it to your debt instead. You should also avoid maxing out your credit cards. In fact, experts recommend you use no more than 30 percent of all available credit at a time to avoid a negative impact on your score and an even bigger chuck of money you have to pay every month. The numbers are very rarely on your side. If you don’t stick to being extremely frugal with your cards, you can get underwater before you even know it.
You should make sure and use all your cards periodically, because if a lender closes your account for inactivity, that can also be bad for your credit. It’s a precarious world out there, and you should never be afraid to question what you’re getting into or consult a financial adviser for help. Sound judgment and proper preparation will help keep your cards in your wallet, which can help keep your money in the bank.
About the Author Daniel Watson blogs for Kanetix.ca, a comparison site where you can find the best rates on insurance to credit cards. Follow him on Twitter at @daniel_w2012.
