Silly ways to use credit cards

by Manshu on January 22, 2010

in Credit

Mr Credit Card has previously wrote about tips to use credit cards wisely. Today, he will be focusing on some silly ways to use credit cards. Mr Credit Card’s favorite credit card company is American Express.

Credit cards, in the right hands are a great tool for consumers. If you use your credit cards responsibly, you can earn great rewards with them. But if you let your credit card control instead, then you are headed for trouble. Here are some mistakes folks make with their credit cards.

Ignorance – I have heard countless times that “my friend said it is OK to buy this on the card as long as I just pay the minimum balance – so I thought it is OK”!!%^&%. There were simply too many times where I heard comments like that and I simply felt like strangling that person. But when I calm down, I realize this is simply ignorance and is very prevalent (especially when it comes to credit cards). Getting a credit card before you even understand the consequences of carrying a balance and simply paying the minimum balance or what an APR is is simply asking for trouble. The only solution to this is to get educated about basic finances and credit cards before you even apply for one.

Carrying a balance for no good reason – I always advocate never to carry a balance. But I do understand where there are emergencies when you have to simply make use of your line of credit that is available on your credit card. But simply carrying a balance as a way of life is not the way to go. You end up paying too much interest over time and that is money wasted. It also fosters bad habits. If you find yourself in this camp, then I suggest getting rid of credit card debt as soon as possible.

Not Disciplined in paying on time – Paying your bills on time is such an important component of your financial life and discipline. While not paying your credit card bills may not be immediately disastrous (since credit card companies only report to the credit bureaus if you are late for 30 or 60 days), credit card companies are watching you and you are unlikely to be treated favorably in matters such as credit limit increases.

Not checking your credit card bills – I am a big advocate of enrolling in autopay feature. But even then, I do check my credit card bills every month to make sure there are no unauthorized payments on my statements. Whether you use autopay or not, or whether you can use paper or online statements, make sure you go through your bills every month diligently.

Playing the balance transfer game – I know folks who carry balances, and keep playing the balance transfer game to keep ahead without making any effort of headway to paying down their credit card debt. This is another silly mistake that simply keeps you trapped in the credit card debt game. If you have credit card debt and are looking to eliminate it, it is perfectly alright to use 0% balance transfer offers to pay down your debt faster. But to simply go from one card to another is sheer madness.

Running a balance to take advantage of 0% offers – More often than not, you will get credit card junk mails offering you 0% APR for purchases for up to a certain introductory period. It is very tempting to buy something you cannot afford on your card if it only charges 0%. Avoid that. You should never buy anything you cannot pay off in full. Many furniture stores offer the same thing, 0% financing for 12 months or even 24 months. Don’t fall for it. Using your credit card this way is the surest way to fall into debt.

Using your credit card as an ATM – Please, please, please – do not use your credit card at the ATM. The money you get will be considered cash advance and you will be charged an interest rate. Use you ATM instead and simply get cash from your bank account!

{ 2 comments… read them below or add one }

BRS January 22, 2010 at 3:43 am

Useful information. Agree with everything here, except the autopay feature. Most credit cards promise “lifetime free”, but many charge annual fee after 1 or 2 years. It may be cumbersome to take it back once is is “auto-paid”.

Personally, I check the monthly credit card bill and use NEFT to make the payment. Also, I don’t wait necessarily for the bill to make the payment.

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Tony January 30, 2010 at 9:16 am

Agree that it’s too easy to take advantage of balance transfer and 0% offers to clear debts, only to start the cycle again, unless you really can clear the balance before the 0% offer ends.

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