How to deal with credit cards – a definitive guide

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Credit cards can work for you

There a lot of people out there that have fallen into the credit card trap and ended up deep in debt.It has probably taken what seems like a lifetime to pay off that debt too with interest that just keeps piling up. Yes, they can make your life miserable if not used correctly but they can also give your finance portfolio a boost if used wisely.

How to deal with credit cards

How do credit cards work?

Most credit cards come with a spending limit of which you can spend too. It is just like a cash loan where the money is put into an account for you to spend. Only with a credit card, the amount is allocated to your card.
Each time you use your credit card to pay for something you are spending a bit of that loan amount. If you pay the balance in full each month most institutes will not charge you interest or will charge low interest.  If you only pay a portion of the balance you will get charged monthly interest on the amount used.

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Tips for using a credit card

Read the fine print

A lot of times we just sign off the agreement and terms documents when applying for a credit card.
That can get people in a lot of hot water down the road as there are things in that agreement that you need to be aware of and fully understand.  There is no shame in asking what it all means or getting someone to read it over for you to ensure you do understand it.
You are entering into a binding legal agreement and as such you need to go in with your eyes open.

Find out the interest rates

Always make sure you know what the interest rates on the amounts are.  This way you know how to better budget for the installments at the end of the month. You can also check that you are being charged correctly.

Check your statements

Most of us look at the bottom line or what we owe for the month on our statements. What we should be doing is going over it thoroughly. Make sure we know the payment due dates, that every transaction on there we are aware of and that we are being charged fairly and correctly.

Pay your card on time

It is very important to pay your credit card on or before the cards due date. If you can try to pay it in full or as much as you can. Even if it is a few dollars above the monthly requirement.

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Use it wisely

Don’t use your credit cards as an extension of your monthly income. This only leads to financial troubles down the line. Try to use it for emergencies and those large purchases that you have fully budgeted for.If you are going to use it for grocery shopping ensure that at the end of each month you put that shopping money back into your credit card.  Remember it is a short-term loan, not extra money.

Offers

Don’t get sucked in on all the special offers that the financial institution has for you. Offers like insurance covers, skip a month of payments, etc.
Ultimately these offers are going to end up costing you.

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