Under the right circumstances, having a credit card can be a great thing. But it has a double edge that can cut you when you least expect it and, though I’m not one of those people who think credit cards are the latest incarnation of Satan himself, using one responsibly isn’t always easy. I’ve personally made ALL these credit card mistakes, but I’ve learned from them and don’t make them any longer.
- Paying less than the minimum payment
- Using your credit card for everyday items
- Getting cash advances with your credit card
- Paying medical bills with your credit card
- Thinking the “rewards” will eventually pay off
Paying just the minimum payment … or less
Paying only the minimum payment or less is a guaranteed way to be in debt bondage for decades. Not only will your principle balance decrease by only a few pennies each month (if at all), but the despair of seeing that balance never really decrease will drive you crazy. I know it did for me.
Cut back in other areas and pay extra on that card
Once I began cutting back on other expenses to through as much cash at that balance as possible, I began to see real progress and generated some momentum in my own mind.
Using your credit card for everyday items
I can remember using my Discover card at Walmart when my wife and I were first married. We couldn’t get out of that store without spending at least $40, and that was in 1990! I would regularly use my credit card when my debit card wouldn’t “go through.” That should have been a flashing sign for me, but I ignored it. We used credit to buy groceries, household items, and other what-nots. Today, I couldn’t point to anything we bought with that credit card.
Use your credit card only if you can pay it off That month
The credit card wasn’t the problem. I was the problem. I didn’t have the willpower or the common sense to stop using the card when my bank account was empty.
Getting cash advances with your credit card
When I was in college, I worked as a bank teller and saw people come into the branch to get cash advances on their credit cards. I didn’t think anything of it until I had a credit card and needed cash. Then I remembered the cash advance. What I didn’t remember was the lack of a grace period or the fact that I would spend that cash and never remember what I spent it on. Even if I did remember, would it make a difference? No.
Stay far away from the credit card cash advance
In certain emergencies, it may be okay, but those circumstances should be few and far between.
Paying medical bills with your credit card and running that tab on up
Paying your bills with a credit card isn’t bad, but for me, I didn’t pay off my credit card bills in anything resembling a timely fashion. Those bills just got larger and larger (see mistake #1).
If you must pay your bills via credit card, pay the balance off quickly
My balance dragged out for years and I paid thousands more in interest as a result.
Thinking the “rewards” will eventually pay off
There are some great rewards programs associated with credit cards. I currently use some of them myself! But rewards should be secondary when you’re deciding to use a credit card. If you don’t pay your card off promptly, those rewards aren’t worth it. How do you think the credit card company pays for those rewards in the first place? It isn’t with the 2 percent surcharge they hit retailers with, it’s with the interest, fees, and other charges you pay when you pay late, or pay over an extended period of time.
Use rewards cards but pay them off quickly!
Despite the radio guru’s protests, rewards credit cards can be, well, rewarding. But only if you pay them off. That will require some discipline, determination, and sacrifice somewhere else in your budget!
The Number One Rule of Credit Card Use
Pay it off. Pay it off quickly. Pay it off promptly. If you follow that rule, credit card debt won’t be a burden to you.
Photo by The Consumerist