Credit Cards - Dos and Donts
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Who's In Charge
Make sure YOU manage your credit
card; it shouldn’t manage you.
A credit card is like a short-term loan. It’s
the most popular form of personal credit,
but also the least understood. Although it
might seem easy to use — just swipe,
right? — there’s a right way,
and a wrong way, to use a credit card.
The Right Way to Charge It
One school of thought says to use
your credit card for everything you buy. If
you’re sure you can afford every one
of your purchases, it’s not a bad idea.
But if you can’t afford your purchases,
using your credit card will not make things
easier.
By putting major expenses on your
credit card, your bill serves as a good map
of your monthly costs, and helps you manage
your spending. Also, if your credit card offers
benefits for groceries or travel, for example,
your “points” will add up quickly.
Credit cards become an excuse for
people with bad spending habits, rather than
a convenient and valuable purchasing tool.
To make sure your card is a help, not a hindrance,
keep the following do’s and don’ts
in mind.
Do’s...
 |
pay
your credit card bills regularly.
Some people think carrying a balance
month-to-month is fine. It’s
not. Your monthly due date is a deadline.
Pay your entire bill, or everything
you can afford, each month just like
you would your rent. |
|
pay
your bill near the end of your grace
period. i.e. the time between
your purchase date and the date that
interest begins to build. This is
the equivalent of a free short-term
loan. Check the terms of your credit
card, but as a rule of thumb, paying
on or just before your due date will
likely allow you to enjoy the free
loan without incurring interest charges. |
|
contact
your card issuer if you have problems.
For example, if your bill is delivered
late or you know you will be unable
to pay your bill on time, contact
them to make payment arrangements.
Look on your bill for details on how
to contact your issuer for questions
or problems. |
|
consider
a credit card with a low interest
rate if you plan on carrying
a balance each month. Learn how to
select a card. And be sure to learn
the impact of compounding interest
— the amount you’re charged
in interest on top of purchase and
interest charges unpaid in previous
months. |
Don’t...
|
use
your credit card like a second paycheque.
And, do not purchase goods beyond
your means. |
|
put
off paying your bill if you’re
near or past your due date.
Payments are processed for the day
they are received, not the day they
are mailed. If you pay by DD, mail
your payment as many as five business
days to arrive. And, never send cash. |
|
be
ashamed to make payment arrangements
if you have financial difficulties.
The longer you ignore your bills the
worse they get. |
|
underestimate
the negative impact of late payments.
Most issuers calculate interest daily,
so the longer you wait the more you
pay. Late payments can also lead to
late fees, higher interest, and a
black mark on your credit history. |
About the Author
Ramesh Guptha,
Welfare Inspector,
Central Railway.
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