Credit cards have every potential to ruin you. If you are not careful in how you use it, you can end up like the millions of Americans who are currently battling their credit card debts. Things have gotten so bad that some baby boomers who are about to retire are quite sure that they will be carrying their credit card problems to retirement. So before you swipe your card, you may want to learn how you can use it without acquiring so much debt.
Believe it or not, there are people who own credit cards but are not in danger of declaring themselves bankrupt for it.
First of all, you have to put up some rules as to what you will use your cards for. It is not advisable to use it for daily purchases as you can rack up a certain amount at the end of the month. Keep it to emergencies or the expensive one time purchases if you want. But still, it has to be a well thought out restriction.
The next tip is to know the billing cycle of your card. This means knowing the cut off of your monthly expenses and the due date of your bill. We all know that all payments (or at least the minimum) must be paid before the due date. This is to avoid incurring late payment fees. It is the cut off date that is a bit more complicated. You have to time your purchase around the cut off date so that you can maximize the grace period. This is the period between your cut off and your due date. If you pay your purchase within the grace period, you only pay for the actual amount that you charged. No interest. The interest rate is only added when a balance is carried over a cut off date.
The cut off is the marker for the credit card company to compute your billing statement. Usually, your due date is 21 days after the cut off period. For instance, if your cutoff is January 31, purchases between January 1 to January 31 should be paid on February 21. So if you use your card on January 29, you have to pay for that before February 21. Otherwise, you get to be charged with interest. But if you wait a few day to make the purchase on February 1 or 2, you get to pay for that on March 21. That is more than a month of saving so you can pay for the balance in full before the interest kicks in.
That is the key to keep your cards from accumulating too much debt. That and the regulation on your expenses of course.
In case you have some credit card debts already, you may want to pay that off through debt management. This type of debt relief will keep you from using your cards while putting your balance on a structured payment plan. A debt counselor can help make your payments more simple and keep you on track towards debt freedom.