Avoiding the Credit Card Trap

Credit cards can be very convenient since carrying cash seems unnecessary in this day and age.  Some people also have a tough time leaving their credit cards at home since they’ve grown more and more dependent on the ease of use they provide.  However, credit cards have both advantages and disadvantages. Because credit cards are so easy to use, you may be tempted to buy things more often than if you were using cash - even if you really can’t afford those items at the time.  If you’ve found managing your credit cards has become difficult, here are few tips that may help you.

Start by Getting Organized

Gather all of your credit card statements together and review them carefully.  This will give you an idea of what kind of spending habits you have and provide you with the opportunity to check for any possible errors.  Keep in mind, there is no way to find potentially fraudulent charges on your credit card unless you review your statements on a regular basis.  Although this is generally a rare occurence, credit card fraud does happen.  In addition, you should get a copy of your credit reports and review those to ensure accuracy as well.

Evaluate the Terms of Your Credit Card

While you are reviewing your credit card statements, check the interest rates for each of your cards and the rates for the different types of charges.  Most credit card companies charge different rates for purchases versus cash advances.  Credit card cash advance interest rates can be high, so be sure to avoid them whenever possible.  In addition, many credit card companies offer promotional rates that include a lower interest rate for only a short period of time.  Often times the lower promotional rate ends before you are even aware of it and you are already being charged more than you were before.

Always Make Your Payments On Time

If you read my post on The Top 5 Ways to Improve Your Credit Score, you already know the importance of paying your bills on time.  Making late credit card payment not only affects your credit, but the credit card companies will almost always charge you a fee for making a late payment as well.  If you mistakenly make a late payment for the first time and usually pay on time, try asking the credit card company to waive the overdue charge. Many times, credit card companies will dismiss the late fee for you if you have a history of being a good customer.

Make an Effort to Begin Managing Your Debts

You may find yourself in the position that so many Americans are in these days - carrying an uncomfortable level of debt.  Think ahead and make a plan on how you will repay your debts or at least begin to reduce them.  Make a budget and devise a way to pay more than the minimum payment required so that you can begin to pay your credit cards down… and eventuall pay them off.  Prioritize your credit cards based on the highest interest rate and start by paying down the one with the highest rate first.  Stop carrying your credit card with you where ever you go to avoid the temptation to buy things on credit that you can’t really afford.

Try Not to Bite Off More Than You Can Chew

This is tough sometimes, but you’ve got to try to avoid spending more than you can afford to pay.  Somethings are a necessity - like food, gasoline, diapers, etc. - but others are purely luxury items.  Of course that gold ring is beautiful and would be a nice addition to your jewlery collection, but the price tag could mean you’ll be paying for it for several months to come. Items like jewlery fall in the the category of things that you don’t really NEED, so if you’re trying to reduce your debt and save money they should go at the bottom of your list.

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