Credit Card Basics

Before you start shopping around for a credit card, think about how you will use it and set some guidelines for yourself. Here are five key points to remember:

1. A credit card doesn’t increase the money you have available, it simply gives you the ease of paying a bit later. So all your credit card spending should fit within your regular budget.

2. Using a credit card to get cash or for other cash-like transactions, such as a wire transfer or money order, is generally not a good idea. It costs you interest from the date of the transaction. If possible, do not use your credit card for cash withdrawal. Instead use your debit card.

3. If you pay your credit card balance in full every month and you don’t use the card for cash transactions, you will never have to pay interest. If you don’t pay in full, the interest charges you pay will incur on every new transaction from day 1. You won’t get any grace period for the new transactions. This would increase the cost of everything you buy with the card.

4. If your credit card balance grows from month to month, that’s a sign that you are overspending and could be on the road to serious debt problems. Stop using your card until you get your debts under control.

5. Applying for a new credit card because you have reached your credit limit on your other cards is not a good solution to managing your debt. Instead, look seriously at how you can reduce spending.

Most credit cards, whether they are standard, gold or platinum, have the same basic function: they offer a convenient way to pay for goods and services. The main differences are in three areas: interest rates, fees, and rewards and benefits. Looking carefully at those details will help you find the right credit card for you. I will write about these aspects in the coming articles… stay tuned.