By now, it is almost necessary to have a credit card. Whether you use it only for emergencies or on an almost-daily basis. Chances are that you have at least one credit card. Many of us have more. And, of course, that is the way the credit card companies like it. After all, with the high interest rates (and climbing), if you run up a large balance and only pay the minimum each month, it will take you years to pay the card off. Even if you get into trouble and end up negotiating your way out of paying back all of what you owe, most credit card companies have already recovered the original amount loaned and then some in the interest charges you have paid. So, because credit cards are so expensive, it is important to keep your credit card spending under control.
The amount of money that you save when you keep your credit card spending under control can really add up. Instead of paying high interest charges to rich credit card companies, you can use that money yourself to build wealth. Good asset management includes wise credit card use. Here are some ways you can curb your credit card spending:
- Create a budget. Make a monthly budget to help you understand where your money is going. Stick with your budget. It is when you run out of money at some point during the month that you have to turn to your credit cards to make bill payments and buy groceries.
- Avoid cash advances when possible. A cash advance has a much higher interest rate than just charging. This can mean that you end up slowly building your balance due to higher interest rates. Additionally, you might be charged a fee (usually between three percent and five percent of your cash advance amount) that is added onto your balance.
- Pay off as much of your balance each month as possible. Paying off your balance results in no interest charges for the month. This means you are not paying for the privilege of using the card. Start paying down your debt if you have it, and pay off balances each month. Spending only what you can pay off can help you curb your credit card spending.
- Put your credit card away. Reserve your credit card for emergencies. Put it in a safe place and avoid carrying it with you on casual shopping trips. That way the temptation will be at home, rather than with you.
- Try using cash when shopping. You would be surprised at how careful you are as you watch your cash disappear. You tend to want to hold on to it when you physically see your funds depleting. With a credit card, there is no visual cue that your funds are diminishing.
- Trick yourself. When you go home to record your credit card transactions, record them as deductions from your checking account. This will give you an accurate account of how much money you actually have. And, when it comes time to make your credit card payment, the money is already "gone" from your account, making it easier to pay off that balance.
Effective and smart credit card use requires discipline. If you do run into an emergency and have to use your credit card, try to make payments for as much as you can over a few months until you pay off the emergency. However, you might try your bank for a short-term signature loan if all you need is $1,000 or $2,000 for car repairs or some other surprise expenditure. If you are a good customer with good credit, your interest rate may be a couple of points lower than the credit card interest rate. It may even be much lower than the credit card interest rate.