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How To Use Your Credit Card Safely

Feb 25, 2008
Some people would argue that the credit card is one of the greatest inventions since sliced bread, but there can be a lot of drawbacks to them if you do not know how to handle the responsibility of using one.

The best way to use a credit card is to not use it at all, really, unless you are already a responsible spender. If you live from paycheck to paycheck like a lot of people do and have trouble paying bills on time simply because you spend money on things you do not need, then getting a credit card is probably a bad idea until you learn to manage your finances better.

You need to be able to manage your own money before you start managing a line of credit, because you are paying interest on anything you put on that line. Interest can be as much as 20% or more and it could take you years and years to pay off a balance of a card that is maxed out if you only pay the minimum payment every month.

Another thing that can be bad about credit cards is the typical cash advance feature. If you need cash to use while you are out, get it from your debit card, NOT your credit card. You will pay interest and probably a fee to get cash from your credit card, while your debit card will only withdraw funds from your checking account.

You should beware even with debit cards, however, and make sure you have enough money in that account to withdraw what you want to withdraw because many debit cards these days will allow you to overdraw and you will be subject to an overdraft fee. This is sneaky on the bank's part simply because the transaction could be stopped for insufficient funds, but is not, so you assume that since the transaction went through, you had enough money.

A good thing about some credit cards is the existence of reward programs. I tend to use my credit cards for any and everything I possibly can to reap the reward points as much as possible, but unless you have a sound cushion of savings and enough income to manage the card payments every month, avoid this practice. You can overspend very quickly if you are not careful and the reward points will not be worth it in the long run.

Another drawback is that if your card is stolen, the thief instantly has access to your credit and, if your debit card is in the same wallet, your bank account. Fortunately, though, you can cancel your credit cards; you cannot cancel cash. Unless you know you will need it, leave your debit card at home.
About the Author
Dror Klar is a writer in the field of finances and is currently assisting those in need of cash advances and payday loans, particularly in the state of New York.
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