Become a smart user of credit cards

It’s hard to imagine getting through life without a credit card or two. Credit cards are a basic fact of everyday life. That’s why being a smart user of credit cards are a key element of staying on the right track. Here are the rules for being a smart user of credit cards.

Know what the card will cost you. Credit card debt is basically short-term, unsecured debt, its very expensive debt. Know what the rate of interest is on a card before running up an unpaid balance.

Know what the grace period is. Some credit cards don’t charge interest on a purchase for 25 days after you make it. That lets you pay off the bill in full, without incurring an interest charge. With other cards, if you have an unpaid balance the interest charges on each new purchase begin the instant the charge goes through. Know the grace period if any, your card features.

Don’t overload on credit cards. You may receive a dozen offers of credit cards each year, each card with its own credit limit. Activate them all and you could quickly pile up more debts than you could pay in a lifetime. The fewer credit cards you carry the less temptation you have to use your cards for binge spending.

Keep tabs on what you spend. Don’t wait for the monthly statement to total up your credit card charges. By then, you could be over your head in debt. Use a pocket notebook to record each when you make it. Set a limit for credit card charges each month. When the notebook says you’re at your limit, put the card away until you’ve paid enough charges to move away from that limit.

Smart ways to pay off credit. Face it you are taking up debt when you run up an unpaid balance on your credit card. Most cards require only a modest minimum payment each month- often as low 2% of the unpaid balance. Paying just the minimum payment each month can keep you in debt. Keep tab on your credit card charges so you’re pinned down in debt. If you feel your credit card is too high, look for ways to pay it down to your comfort level.

Look for ways to liquidate some assets to pay your debt such as bank account where you have cash that is not earning as much as your credit card debt is costing you.

• Consolidate two or more credit card balances by transferring them to the card with lowest interest rate. Keep paying the same amount on the combined debt as you were paying before.
• Consider accepting a new card with a low introductory rate and use cash advances on that card to pay off your other, higher-interest cards. But remember on that card to pay off other higher-interest cards before the introductory rate runs out. Typically six months to a year after you open the account.
• Take out a home equity loan. The interest rate on these loans is typically half the interest rate of the credit card companies charge. The interest you pay on a home-equity loan is tax deductible