Credit Cards

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Credit Cards
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How to Use a Credit Card Responsibly
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• I wrote this article in 2007 when I was still
  digging out of debt and struggling with how to
  quit my bad money habits, and Ive since updated
  to include some things Ive learned in six plus
  years of blogging about money.
• Using a credit cards responsibly isnt a
  difficult concept. Whats important to remember,
  however, is that how you use credit cards is a
  habit. During your first few years of using
  credit cards, you will either develop good habits
  or bad ones. And you can take it from me, being
  reckless with credit cards is not only a hard
  habit to break it can cost you thousands and
  thousands of dollars.

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• How credit cards work
• Understanding a bit more about how credit cards
  work can help you use them responsibly.
• When you swipe your credit card, your bank loans
  you the money to make that purchase. The credit
  card then gives you a grace period typically
  between 20 and 30 days during which you can pay
  off that purchase before interest begins to
  accrue.
• Grace periods are powerful because they give you
  the opportunity to use your credit card as a
  short but interest-free loan.
• As long as you pay every penny you charged last
  month before the due date, you wont pay
  interest.
• Sooner or later, however, many people do not pay
  their credit card balance in full each month,
  turning their credit card into a revolving credit
  line. Finance charges (interest) then accumulate
  on the unpaid credit card balance each month.

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• Now the credit card companies make a little bit
  of money every time you use your card because
  they charge stores 1 or 2 percent of your
  purchase (called an interchange fee) to accept
  the card.
• But the real money comes in charge you interest
  when you carry a balance in other words, you
  dont pay off your purchases in full at the end
  of the month. Credit cards typically charge
  interest rates between 10 and 20 percent. So,
  with interest at a 15 percent annual percentage ra
  te (APR), if you charge 500 to your card that
  you dont pay off for a year, youll end up
  paying the bank 75 in interest. If you owe
  5,000 thats 750 a year in interest, 50,000 is
  7,500 a year!
• The worst part is that credit card companies make
  it easy to get into this situation by only
  requiring you pay a small minimum payment each
  month, usually between 2 and 5 percent of your
  balance. So until you hit your cards credit
  limit the most the bank will let you borrow
  its very easy to charge a large balance thats
  difficult or impossible for you to pay off.  And,
  once you have it, the interest meter keeps
  running.

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• If youre in this situation, you may be able
  to do a balance transfer in which you transfer
  your balances to new credit card that has a 0
  percent APR for the first few months. This is a
  tool credit card companies use to get you to
  switch from one card to another of course they
  hope that you will continue to pay them interest
  after the promotional 0 percent aPR expires.
• Whatever you do, if you get stuck with a credit
  card balance you cant immediately pay off, you
  need to make and follow a plan for getting out of
  debt like I did.

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• To use your credit card responsibly, you must
  develop the habit of paying your balance in full
  each month. That means keeping track of how much
  youre spending on your credit card each month
  and ensuring you will have enough cash the
  following month to cover your purchases.
• I find that using one credit card for nearly all
  of my monthly purchases not only makes this
  fairly easy, but has made it easier to manage my
  money, keep my checking account balanced, and
  track my spending.
• With a very simple spending plan in place, you
  should know how much discretionary income you
  have left after required monthly expenses.
• Lets say your monthly spending allocation is
  1,000. Now assume youll need 100 in cash for
  various transactions where using a credit card
  isnt feasible. You know that you have 900 to
  spend for the month and can easily track how much
  you left to spend by checking your credit card
  balance, which most cards allow you to do easily
  and for free online.
• At the end of your credit card billing cycle,
  simply pay the balance and start again.

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Source http//www.moneyunder30.com/how-to-use-a
-credit-card-responsibly
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