There are some problems that can be associated with using a credit card that offer alluring incentives like cash-back rewards or free airline miles. These benefits can be very enticing and used well to help bolster your credit, but they can also be problematic if not managed properly. Proper management is the key to financial security.
Without a doubt, the biggest factor responsible for credit card problems is the idea that you’re somehow spending “free money.” Rest assured that this is not the case! It can be easy to hand over a piece of plastic and not think of it as cash. But it really and truly is – and understanding this is the first step toward a positive relationship with credit.
When you use a credit card, it is just like taking out a mini loan. When you don’t repay your loan at the end of the month, credit card companies add interest onto the end of your tab. Now, if this is handled in moderation it is not a problem. However, it is easy to make mistakes and let things slide. If this happens, things can feel overwhelming quite quickly – and you don’t want that.
Some people manage their credit debt by not having a credit card at all, but this isn’t a good approach for all individuals. A good way to manage yourself and build credit at the same time is to reserve your credit card for online bill pay. Leave it at home when you go shopping – after all, if you don’t have it with you, you can’t use it, right?
The less you use your card the better. Setting it aside for scheduled payments so that you build a good credit score is one of the safest, sure-fire approaches to responsible spending. If you need some friendly advice, talk with a bankruptcy lawyer – you might be surprised how many good options you have when it comes to managing your credit!