Credit Cards

Don’t Let Over Using Credit Cards Ruin Your Personal Life

Consider how you intend to use the credit card to ensure the credit card actually benefits you.

You have likely heard stories about how credit card debt ruined someone’s life or forced someone into bankruptcy.
You may think this is due to the tactics of the credit card issuer or the evils of the credit card industry and ultimately avoid applying for a credit card altogether.

Be Sensible and Ensure That You Apply For The Right Credit Card

It can be overwhelming when applying for a new credit card. After all there are thousands of credit card options to choose from. How do you know if you are picking the right credit card? Does the type of credit card you choose really make a difference? The answer is Yes!

Before you apply for a credit card, you should learn some basic credit card terminology. Then consider how you intend to use the credit card to ensure the credit card actually benefits you. Know that how you manage your credit card may affect your credit file also.

Learn The Credit Card Language and Terminology

  • Annual fee – Fee you are charged annually to use the credit card.
  • Annual percentage rate (APR) — Annual interest rate you will be charged on the balance carried forward each month.
  • Credit Limit – Maximum amount of money the card issuer will let you borrow.
  • Credit score – A credit score is a three-digit number summarizing how well you have managed credit and debt. See how to raise your credit score.
  • Due date – Day your credit card payment is due.

The Annual Fee Versus Annual Rewards

Compare the cost of credit card annual fees offered by different card issuers. As  this is a fee you will be paying each year. The credit card annual fee should balance out the rewards you earn from purchases made on the credit card. Consider the main purchases that you will be making on the credit card. Then look for credit cards that offer rewards in those areas.

For example, if you plan to mainly use the credit card for daily purchases (such as groceries and fuel.) Explore  a credit card that gives you points or rewards based on the total amount spent at grocery stores or gas stations. Reward points you earn from credit card purchases and slowly build up

Choosing The Right Credit Card APR

Look for a card with a low APR if you plan on carrying forward credit card balances from the previous month. You may be able to avoid paying any interest at all if you pay off your balance in full each month. If you are in this category, the APR shouldn’t be a deciding factor since you don’t pay interest on zero balances.

Setting The Best Credit Limit

It may be exciting to see that you could get approved for a credit card with a $40,000 limit, but do you really need this high a credit card limit?  Credit card issuers may charge you a higher APR or annual fee after offering a high credit limit.  If you do not need the full amount, consider accepting a lower credit limit for a lower APR or annual fee.

Just because you were approved with a credit limit of $30,000 doesn’t mean that you should spend $30,000 in the first month of owning the new credit card. Remember that you will be paying interest on the outstanding credit card balance each month. Use judgment when making purchases and try to think of your credit card as a Debit card by only spending money that you already have.

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Chris Blagden

Chris is a lead reporter for FinanceInsider. He covers the financial world; specializing in autos, consumer finance and insurance. He enjoys reading with a glass of wine, and traveling with his wife.

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