How to Handle Credit Cards

Whenever you can avoid using credit cards and just pay for an item in cash (or by check or by using a debit card), that is always the best plan. However, sometimes credit card use cannot be avoided, just as there are certain circumstances in life, including the act of purchasing a home, that necessitate taking out a loan from a bank.

The less debt you can accumulate using credit cards (and/or by borrowing money from other sources, such as banks), the better, especially when it comes to your overall financial health. For a step by step plan about how to better manage your credit card usage, read this article.

Difficulty: Challenging

Instructions

1. Apply for what is called a no-fee rewards based credit card (as opposed to one that offers no rewards and charges fees.) Such cards often require you to pay off your debt completely each month. This plan requires a great deal of financial discipline, but it is the best route to take in order to keep your credit in tip-tip shape. (Do not fall behind on your payments because that will defeat the purpose of your plan.)

2. Never borrow in excess of a third of the credit that is available to you. Any time you exceed this amount, you run the risk of damaging your overall credit score.

3. Pay off your credit card debt before your other debts because credit card companies typically charge greater interest than banks and/or any other lending entities. And whenever possible, pay credit card debt in full each month (even if you are not required to do so) in order to avoid (or at least cut down on) paying all that interest.

4. Never withdraw cash advances using your credit card. Only withdraw cash from your bank account(s) using a debit card. (It is actually preferable to go to the bank in person to make your withdrawals, rather than using an ATM machine. This way you can avoid paying for ATM transactions as well.)

Tips & Warnings

• Always have a solid working knowledge and understanding of your credit score and what it means. This requires getting a free credit report at least one time per year, and perhaps even more frequently than that.
• Watch out for scam artists offering credit options that sound too good to be true. When it comes to personal finance, managing your money and staying (or getting) out of debt, you need to be exceedingly cautious about only doing business with reputable companies.

[redar]

on 10/7/2009 I hide my credit cards from myself, lol great 5* article and great advise.