Dos and Don’ts of Using Credit Cards And Avoiding Credit Card Debt

The ways to handle a credit card and things to do and things not to do is something that we have covered at length in various different posts before this one. However since very few places educate the people on the good and responsible use of a credit card, and certainly not the credit card companies, it may be worthwhile to summarize the dos and don’ts of using a credit card responsibly once again.

Do Not Get into the Habit of Making a Minimum Only Payment on Your Credit Card Every Month

Do not form a habit or rely on making the minimum payment only on your credit card. To someone who has studied using your credit card recently it may seem like an excellent thing to do. You can use your credit card to buy something expensive but have only to pay fraction of that money every month. This is not so great chronicle rate the hundreds of thousands of dollars that you will pay towards the interest-free and financial charges and the number of months or years that it will take you to pay off debt.

 Do Not Use Your Credit Card As a Substitute for Cash Or When You Do Not Have Money to Pay for Something

Do not be tempted to use your credit card many do not have the money to pay for something. We now that you will only be required to pay for what you purchase with your credit card at the end of the billing cycle. But the odds are that if you cannot afford something right now, you will not be able to afford it 20 days later as well.

 Do Not Try and Close a Credit Card Account To Avoid Paying the Balance on It

Do not close a credit card simply because you have done a huge amount of debt on it. Closing a credit card while you still have a balance on it is in one of the worst things you can do to your credit rating. Closing a credit card reduces the credit limit of that account to 0 while still having a balance on it will make your credit utilization becomes very high. So if you close a credit card accounts that still has a balance on it but do not pay the balance soon your creditor might reports that account as delinquent to the credit bureau and sell off the debt to a collection agency which can be doubly damaging to your credit rating.

 Never Skip  Making Payments on Your Credit Card

Do not skip the credit card bill payment completely. Missing a payment on the credit card will have several chain reactions and not some will be positive. Missing a payment completely might have the creditor report your account as late to the credit bureau which will have a bad impact on your credit score, missing a payment may result in the increase of your interest rates along with the creditor charging you extra late payment fee, it may also result in increase in the interest rate on your other credit cards if the terms and conditions of your current credit card includes a clause that is called Universal Default.

Now for some positive practices that you can follow with your credit card usage.

 Use the Credit Card As the Financial Tool and Not for Impulsive Purchases

Before you use credit to make purchases, differentiate between things that you need and the things that you want. A credit card can go a long way in helping you organize your monthly expenditures. It enables you to get one consolidated bill at the end of the month for all the purchases that you have made. This means that you can use a credit card as a strong financial planning tool while building a good credit history for yourself at the same time.

Ask the Credit Card Company for Assistance Or Apprise Them of Any Future Problems With Meeting A Particular Monthly Payment

In case you’re anticipating a problem with making the monthly payment on your credit card you should intimate your credit card provider. You just might be surprised at the kind of assistance your creditor is willing to provide you with. If you can make the creditor understands that this is one of occasion the creditor is in a position to waver your monthly charges and interest rate as well as continuing to vote your account as current and positive to the credit. He can also the delay the date of payment so that you have some grace period to come up with the money to pay for your credit card.

 Try to Keep the Credit Utilization Ratio on Your Credit Card Low and within the 30% Limit

Stay within 30% of your credit card limit. This is important for the credit utilization ratio and subsequently important for your credit score calculation. Credit utilization ratio forms of 30% of your credit score.

Renegotiate the Terms on Your Credit Card With the Credit Card Company

Negotiate better terms of interest with your creditor. If you feel that you deserve better terms of interest from your creditor either because you have a positive image history or because you were getting better offers from other credit card providers, do not feel shy or hesitant in communicating your requirements to the creditor.