Credit cards often get a bad rap due to their high interest rates and some people’s tendency to rack up thousands of dollars in credit card debt. However, if you use them properly, they can actually be a very useful tool. Renting a car, booking flights and ordering online are all things that would not be possible without a credit card. Here are some guidelines for making wise decisions about your credit card use.
Always pay off your balance in full. This is the number one rule of using a credit card and means that you should not be buying more than you can afford. Just because you have access to funds through your credit card, that doesn’t meant that you have the cash to cover it and not paying off your balance each month means that you’ll start incurring interest charges on any balance you carry. A good rule is to not charge anything you wouldn’t otherwise buy with cash. If you can’t pay in full one month because of an emergency, at the very least, you must pay the minimum and should definitely aim for more than that.
Consolidate your debt to pay it off on time. Credit card debts can spiral out of control if you don’t follow rule #1 above. If it does, and there is no way that you are going to pay off this debt in full, consider consolidating your debt.