Plain Old Common Cents

Who Should Use A Credit Card?

Credit cards are not for everyone. Some people do not have the self discipline required to control their spending with a credit card. I recommend that these people only use debit cards. If you recognize that you have a problem with controlling your spending, then the last thing in the world that you need is a line of credit.

Step 1: Picking Your Card

Don’t bother filling out the credit card offers that come to your mailbox, go straight to the source- the bank. If you need help looking for a card, click here to read a SmartMoney article about the best rewards credit cards. Personally I like the Discover Card program because it gives me cash, but make sure you like the rewards program for the card you select.

Step 2: Using Your Card

Now that you got that fresh new card in your hand, go and run up a big balance at Best Buy. Just kidding, that’s the last thing you want to do. Credit cards are not free money, so get that idea out of your head. Credit cards are a tool to use when making purchases that you would make anyway. I personally use my credit card for every single purchase that I can get away with. I normally don’t use it when splitting a restaraunt bill with friends or for purchases that are less than one dollar. By using my credit card for every purchase it enables me to easily track all of my expenses online. This is important for easily establishing a budget and keeping track of your monthly expenses.

Step 3: Paying Your Bills

So now you have used your card for about one month and you just got your first statement. The first thing you should do is quickly check over all of the purchases and make sure they’re legit, because you want to catch someone illegally using your credit card as soon as possible. I check my account several times per week to stay on top of things, and I check more often when I’m expecting either large purchases or many smaller ones. Because I check so often, I don’t normally spend much time on the monthly bill, but I always check to make sure I haven’t been charged any interest or fees by the bank. The next step is the most important, and the one that makes the whole concept of credit cards a financial tool rather than financial suicide, and that is to pay off your balance in full. I do not care if your card has a low APR or a zero percent APR, you must pay off your statement balance at the end of every month. By paying in full at the end of each month you will avoid all interest and finance charges, and you should start building points in your rewards program.

Step 4: Be Smart And Be Careful

Now that you have a credit card, do not abuse it. Use it as a way to help you take control of your finances and to give yourself some fun rewards (I recommend turning points into a Nintendo Wii if you can), but be careful. There is at least one study out there that says using a credit card will increase your spending over using cash. I suspect this is true because most people are using a credit card to live beyond their means and they never intend to pay their bill off at the end of the month; however, there might be some truth to the fact that using a card instead of cash desensitizes you to the pain of giving someone your hard-earned money. Just use some common sense and only purchase things that you can afford to pay for with cash.