Common sense advice for credit card use

The use of credit cards is very convenient but without a good level of consumer awareness might become a highway into financial distress.

Credit cards are a very efficient payment method as you can keep track of all your purchases, make use of promotions and of course do without cash and checks and the logistics involved. However, for the unwary, credit cards are also means of encouraging higher consumption which is not always needed.

Educated consuming is always recommended and is strongly advised in the case of credit cards as well.

A couple of do’s and don’ts for a more efficient use of credit cards:

DON’TS

1. Do not pay on installments
Paying on installments often helps buy that desired item today instead of in a couple of months. But paying on installments also has a few major disadvantages. Paying on installments creates an illusion of extra funds which, in turn, can be used to purchase another item, on installments of course. This method of purchase quickly leads to lose of control over expanses and results in a tight budget for the upcoming months as your paycheck is already spent.

2. Do not pay using credit
Interest rates on credit are quite high using credit cards. The accumulating interest is significant.

DO’S

1. Use one credit card
Having more then one credit card is a risk. The use of one credit card and one alone is crucial in order to manage and control your expenses, credit lines and more. Having more then one credit card might result high debt and tight budgets.

2. Try to use your credit card for fixed costs alone. Use cash for variable costs
Using credit cards for expenses such as food, gas, electricity and communications will help you take advantage of the benefits of credit cards with out losing control over expenses. Using cash for variable costs such as a one time purchase would help you better control your budget as you only buy what you can afford.