Responsible Credit Card Use

Credit cards have benefits, despite their dangers. While it may not be advisable to have a plethora of them if you’re a spendthrift (being that credit cards can be a dangerous tool in the wrong hands) for those of us who have better self-control, there are solid credit cards that can prove to be more helpful than plain old debit cards.

It looks like the credit card industry is picking up a little steam these days, compared to how things were during the heart of the financial crisis. I’m seeing more offers from credit card offers that help you earn rewards for purchases you make. It seems like more credit cards with 0% APR terms are becoming more accessible to folks again; many of them often have great terms, such as no interest for purchases for a set number of months, oftentimes extending over a year. Such terms allow cardholders to afford those big ticket items more easily, but any credit card should always be used with care.

For the students who need to have a cap on their spending, the best student cards offer a lower credit limit, and even a rewards system that’s tailored for their universe: some of these cards are now giving college students with higher GPAs some awesome benefits. All the more reason to aim high! Novel credit cards like those from Citibank offer extra rewards points per semester to those students who maintain top grades and who demonstrate good financial behavior when using these cards. All they need to do is to present their proof of a great GPA, and they’ll get bonus rewards points.

While many folks may disagree, I believe that credit cards aren’t evil. If you need to work on developing more self-control, then go ahead and put your card away: ask your mom, your spouse, or a very trusted friend to keep your credit card locked for you. For those who have a hard time controlling their spending, it would be best to use plastic only when absolutely necessary, such as for emergencies. And no, luxuries like premium Amedei chocolates and some good French or Italian wine DO NOT count as “emergencies.”

So before you consider applying for a credit card, take a look at our guidelines for responsible credit card use. Again, the key thing is to stay disciplined with your spending and to do everything in moderation. Here are 6 cardinal rules to using a credit card wisely:

  1. Never use a credit card to make big ticket purchases you know you can’t afford to pay within 6 months. If the repayment will cost you more than 5% of your overall budget, then forget about it.
  2. Limit the use of your credit card to emergencies, if you tend to pile on the debt. And try to pay off your balance here as quickly as you can. That way, you’ll also limit the interest you pay.
  3. Pay your card in full each month, as much as possible.
  4. If you don’t maintain a balance and have a good handle on your finances, then you should consider using rewards cards so you can benefit from rewards when you spend and shop.
  5. If you’re having difficulty managing your spending, cut up your credit cards, freeze them or hide them away until you get control of your debt. This way, you can guarantee that you won’t use your credit card irresponsibly. Consider the cash only lifestyle where you pay for your purchases with cash until you get a handle on things.
  6. Always, always pay your credit card bills on time. Not only will this help you avoid penalties, but this will also keep your credit score afloat. Skipping payments will hurt your credit score.

Using a credit card requires a responsible attitude, discipline and a respect for boundaries. So keep yourself in check, make sure that you don’t overspend money that’s actually not yours, don’t carry too many cards, and be a responsible credit card holder!

This was a guest post from The Digerati Life is a personal finance blog discussing credit card reviews, proper credit card use and other financial resources.

Readers what do you think of the tips that The Digerati Life recommend for credit card use?  Do you have any additional tips?

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Reader Comments

  1. JoeTaxpayer says

    I am not anti-card, but I think even a 6 month payoff is too much. It's a slippery slope, too easy to go from the intended payoff to making minimum payments. For me, the only good card is one that's paid 100% in full each month.

    So long as you're doing that, go for the best return. I get 2% cash into a 529 account. This account now has over $7000 in it. No it won't even pay a semester, but $7000 is nothing to sneeze at.