The Do’s And Dont’s Of Credit Card Usage

In today’s modern American society, credit cards have the capability to be an extremely useful tool or a bane to your existence. As with most aspects of life, whether the experience is a positive or negative one will hinge mostly on how it is used. If you use your credit cards in a responsible and well-informed manner, they can be your best friend. If you use the frivolously or carelessly, they can be your worst nightmare.

There are several, important things to keep in mind when it comes to credit cards. Most pitfalls can be avoided if these simple rules are followed.

Do Keep Your Credit Card Secure

One of the most important of all considerations when it comes to using credit cards happens before it is even used in the store. When you first receive your credit card, the first thing you will want to do is sign it. By signing your credit card, you can make sure that another person is not able to use it in case it gets lost or stolen. Merchants are required to compare the signature on the back of the credit card with the signature on the sales receipt. If the card is unsigned, this becomes impossible.

Another suggestion that makes your credit cards even more secure is instead of putting your signature in the field on the back of the card, instead write “Check ID.” When a cashier checks the back of your card, they will then ask to see a state-issued identification card to ensure that the person using the card is in fact the owner.

Never carry your PIN number written in the same place as where you keep your credit card. If you lose your wallet or purse, or if it is stolen, someone could easily visit the closest ATM machine and drain your account.

Always make sure you get your card back when you are using an ATM. While many modern ATMs allow you to simply swipe the card in order to use it, some still require that the card be fully inserted. Once the transaction is finished, be sure to grab your card along with the cash.

Don’t Use Your Card For Everyday Purchases

Once you have ensured that your card is secure in every way possible, it is time to decide what type of purchases to use the card for. One of the biggest pitfalls a credit card user can fall into is using it to purchase everyday items. By using your card to purchase things such as food, gas and clothing, it is easy to fall into the mindset of viewing it as a replacement for cash. This can lead to using the card much more frequently. Frequent use of a credit card is one of the easiest ways to find yourself facing an insurmountable pile of debt.

Do Spend Only On What You Can Afford

After you have schooled yourself not to use your credit cards for everyday purchases, you need to establish exactly what you will use it for. In a large percentage of cases, credit cards should only be used in emergencies. Emergencies are circumstances that only happen on an infrequent basis. As a result, this falls directly in line with the lesson learned by not using it for everyday purchases.

However, it is not always necessary to restrict credit card usage to emergencies alone. The reasoning behind that rule is avoiding the accumulation of unmanageable debt. If you have honestly assessed your finances, you may determine that you can easily afford a credit card payment each month. If that is the case, you may want to use it to purchase an item with a price tag that is more than what you can pay in cash.

This can even apply to an item that you don’t actually need. For example: You have had your eye on a new widescreen television for some time now. You don’t have the cash on hand to purchase it. However, you are expecting a sizable tax return in a month or two. As long as you know that you will have the discipline to apply the tax return to the credit card balance, the decision to purchase it early is not one that would be considered irresponsible. As with many things in life, it is all about knowing your limits and having the self discipline to stick to them.

Don’t Pay Only the Minimum

One of the biggest pitfalls a consumer can fall into when it comes to credit cards is associated with how much to pay each month. Since credit card companies make the bulk of their profit on finance charges, it is actually advantageous to them for you to pay as little as possible every month. By paying the minimum, the balance is kept at the highest amount possible, earning them top dollar in finance charges. On a $10,000 credit card balance at 18 percent interest, paying the minimum will take approximately 24 years to complete. Meanwhile, you will have spent more on finance charges than the actual balance.

Paying more than the minimum has another advantage. If your payments each month are very small, it may seem possible to run up large balances on more than one credit card. The logic being that since you only have to pay a small amount on each per month, you can easily afford to do so on more than one credit card. This is a surefire ticket to unmanageable debt.

Do Keep Your Credit Card Company Informed Of Any Problems

If you have found yourself in a situation where you have a credit card payment due, and you are simply unable to afford to make the monthly payment, be sure to notify the credit card company. Most companies are surprisingly willing to work with people who are presented with a situation like this. If you have a long history of on-time payments, it may be possible for additional late fees to be waved. This can only happen if you take the time to contact the company and apprise them of the situation.

While many of these rules may seem like common sense, it is extremely common for them to be forgotten or ignored when it comes to credit card usage. Obtaining a credit card is a privilege, not something that is guaranteed to each person. When it is acquired, responsibility and care is required in order to keep it in good standing.

Photo: Bryan Rosengrant