There is little more tempting than seeing something you really want and purchasing it – even if you don’t have the money! Credit cards make this kind of consumer impulse buying very possible. While on the one hand, they provide flexibility and extra lenience when it comes to allocating your money, this convenience can come with a hefty price tag. Credit card debt is the most easily accumulated kind of debt – and the hardest to get rid of. When used smartly and correctly they are a useful financial asset, but be careful not to fall into a trap. This article provides tips on how to use a credit card safely, however, it should not be regarded as definite financial advice.

How Credit Cards Work

If you’ve never had a credit card before, the concept of spending money you don’t actually have can be somewhat exciting. Look a little closer, however, and you’ll see exactly how these cards are able to function. Credit cards are provided by a range of different services, ranging from banks and private money lenders right through to department stores. Cards provided by stores can usually only be used within that particular franchise and its partners, however. These providers have only one thing on their mind when they give you the card – interest.

When you buy something on credit, you cannot just forget about it. Most credit cards will apply interest every month, meaning that the initial amount you borrowed will continue to increase. This is how credit cards are able to operate – because even though it seems like common sense, many people will borrow more than they can afford to pay back, often only managing to pay enough each month to cover the interest and not the principal (original) amount. This isn’t necessarily due to negligent spending – in tough economic times, many families and individuals find themselves forced to turn to credit when they need it. For others, it starts as a “one-time thing” that spirals out of control once they feel the freedom of unrestrained purchase. Be extremely cautious when getting any type of credit card.

Tips For Using Credit Cards Wisely

Credit can be a useful tool – if something you need is on sale but you don’t have the money right now, you can buy it anyway and pay it once the money comes in. Unfortunately, many people overestimate their ability to pay back, or find it hard to do so once their hard-earned money actually arrives. To stay safe, here are some tips:

  • Don’t borrow more than you can afford to pay back. This is the absolute cardinal rule of using a credit card. If you borrow anymore and are slapped with high-interest payments and overdue fees, you’re just throwing money away.
  • Once you have debt, make it your first priority to pay back. Credit card interest is usually far higher than any other kind of interest, so you need to get rid of it as quickly as possible.
  • Find out if there are any benefits or rewards associated with your card – if you know you definitely have the money to pay it off, it can be a great way to earn points without incurring the fees and interest.
  • If you feel you have an addiction to spending, pay it off and cut it up. This is easier said than done but is the only way to ever truly end a dependency on debt.
  • Weigh up every single cost involved when confronted with a “good deal”. That computer may be on sale now, but how much will you end up paying for it when all the interest and fees are included? Often it’s more than the original price.
  • Many people make bad credit card decisions when they’re young, so please educate your kids before they have a chance to make a mistake that haunts them for years.

Credit cards can have financial benefits, but these are conditional on smart, conservative usage.