Avoiding Credit Card Pitfalls

It seems that nearly everyone these days carries at least one credit card, and there's no doubt that they can make life much more convenient. They can remove the need to carry cash around, and can make buying goods over the internet or telephone easy. They can help spread the cost of expensive purchases over a few months, and can even earn you a profit if you take full advantage of cash back offers or rewards schemes.

However, it's also possible to get into a whole world of trouble through reckless use of credit cards, running up debts which can have a real impact on your financial wellbeing. Ideally, you'd use your card only as a payment method and not carry a balance, but this is pretty unrealistic for most people. Even if you accept that some level of debt is okay, there are still things to avoid if you want to stay out of credit card hell.

Impulse Spending

When you're seized by the urge to buy, a credit card makes it easy to purchase in haste and repent at leisure. Will your impulse buy seem as essential when your bill arrives? Avoid temptation by leaving your card at home rather than carrying it with you as a matter of course.

Essentials

Credit cards are a convenience and a handy if expensive way of borrowing over a short period, and shouldn't be used to cover essential costs such as energy bills or food shopping. By all means use your card as an easy payment method, and pay the bill when your statement arrives, but if you're using the card to borrow money to make ends meet then a closer look at your budget is in order.

Other Debts

Similarly, you shouldn't use your card to service other debts if you can avoid it. Credit cards are by no means a cheap form of credit, and so if you really do need to borrow then a cheaper debt consolidation loan is usually a better bet. An exception to this rule is making use of a balance transfer facility, but that's a whole different topic to itself.

Cheques

Some card issuers persist in sending out 'convenience cheques' which can be used to pay bills etc and have the charge made to your card account. What isn't quite so convenient is that the interest rate charged on debt built up with these cheques is usually much, much higher than the card's standard rate. Avoid.

Cash Withdrawals

You should avoid withdrawing cash from a cash machine using your card whenever possible, as the interest charged will often be nearly double that charged on purchases. Added to that there will usually be a flat fee as well. Although useful in an absolute emergency, cash withdrawals are an expensive way of getting hold of cash and should only be used as a last resort.


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