Becoming a Smarter Credit Card User

Ah, one of my favorite topics. How do you become a better credit card user? How much can you really afford to use on your credit card? Don’t think, “Well, I’ll just buy this now and think about paying for it later.” The credit card is the genie in the lamp for the average consumer that gives you what want now without paying…at least for a little while anyway.

Plan!
Set a budget for your credit card! Treat it as cash! When you buy on credit always set aside money in your paycheck or bank account to pay off the amount you just used. Keep a tally of what you spend in day timer or palm pilot because planning and keeping track of your daily expenses is how you start to understand your financial self.

Credit Card Points
Here’s one of the main reasons that I have a credit card. Although I do have to pay a $120 annual fee on my credit card, I have my credit card because I can accumulate points for every dollar I spend. Hey, I almost have a business round trip ticket to anywhere in Asia because I accumulated points by using my card. I even put my entire down payment for my car on my card just to rack up the points. And guess what? Because I planned for all my purchases, I haven’t paid a penny in interest.

Pay your entire balance every month
If you pay your entire balance off every month, this way you won’t accrue any interest on the purchases that you made. If you have a huge balance, then that just tells me that you’ve done some excessive spending. Not everything you buy is a necessity, there are always items that you can “weed” out to limit your spending. Remember every dollar saved is two dollars earned. (Well not exactly, but it feels better to think this way)

Credit Rating
Here’s the other main reason that I have a credit card. Here’s a question for you. Who do you think the bank would rather lend money to? A person who has a 99% chance of paying off their loan or a person that has a 50% chance of paying off their loan and also skips some of their monthly payments?

The answer is obvious, any financial institution wants to lend money to someone that has a better credit rating and has a higher chance of paying off his or her loan in the prescribed time. If you use your credit card intelligently then your credit rating will improve because you are showing people that you can actually handle debt and can pay it off.

Be Smart
Don’t think of the credit card as something that helps you buy things you can’t afford or an emergency tool. Use the credit card as a tool to help you earn a better credit rating and more responsible financially.

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