Financial credit plays an important part in our lives. Although using credit is easy, you must use it wisely to protect your financial future. The Federal Reserve reports that approximately 40 percent of Americans spend more than they earn, and most of that is on a credit card.
Don’t be fooled, credit is not a gift; it is something “borrowed” that must be paid back. It is there to help your life, not hinder it in the long-run. Consider some of the following guidelines for using credit cards wisely:
Plan to pay off your balance each month to avoid interest and other fees. If you cannot afford to pay off the balance, do not make additional purchases on your card until you can do so.
- Don’t just collect credit cards, so you will have more money to spend, or you want to have the cool picture that comes on the plastic. According to the Nilson Report, the average number of credit cards per U.S. household is 12.7; you do not need that many. Not only will you have the potential to overspend, but you will be charged interest rates (and other fees) on each card and be responsible for repayment.
- Save all your receipts and reconcile them with your monthly credit card statement. If you find any discrepancies, report them immediately to your credit card provider or financial institution.
- Keep your balance low; some experts recommend maintaining a balance of no more than 30 to 50 percent of the credit limit.
- Always make the payment before the due date to avoid late fees and interest charges.
- Avoid using your credit card for everyday expenses, such as groceries or fast food. Instead, use your debit card for those purchases.
- Don’t give out your credit card number over the telephone unless you initiate the call and know for certain the recipient is a legitimate source.
- Always keep your credit card number and the phone number of the creditor’s service line at home in case of a lost or stolen card. Of course, you should keep this information in a secure location (e.g., safe, locked desk drawer, etc.).
- Be aware of all fees associated with your credit card prior to accepting an offer.
- With the increase in identity theft, it is also a great idea to review your credit report at least one time per year. In fact, Federal law states that you have the right to one free credit report per year.
Credit is a part of our everyday life. It is important that you establish credit and keep at least one credit card for emergencies, or for such purposes as establishing a line of credit for a utility or lease contract. The key is to control your expenses, so credit is a benefit to your financial future; not a burden.
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