Using Credit Wisely

Having good credit is a very desirable thing in our society, and it’s difficult to accomplish your financial goals without it. But too often for many Americans, credit card debt spirals out of control and becomes a crippling liability, wreaking havoc on personal finances that may take years to recover from.

Wise use of credit

It has been said of credit purchases, that if you can’t afford to buy an item today, chances are you won’t be able to buy it tomorrow either. Meaning, if you purchase something with a credit card because you can’t afford to buy it with cash, you may be putting yourself in a bad situation when it comes time to pay the bill. In addition to the cost of the item, you’ll pay interest and fees, and, if you only make the minimum payment every month, interest and fees may be the only thing you’re paying and it will take years to pay off your balance.

Of course, there are times when making a purchase on a credit card can be a great convenience and make it possible to buy something you need but can’t pay for immediately. If you know you can pay the balance in a reasonable amount of time — the key being reasonable — it certainly won’t hurt to do so. In fact, it will help you build and maintain good credit.

Warning signs of unwise credit usage

A real sign of trouble with your credit card spending is when you can only afford to make the minimum payment each month while your card balance — and the amount of the payment — goes higher and higher because you continue to overspend. Are your credit cards charged to the hilt? Are you spending more money each month than you earn? These are all warning signs that it’s time to act before your finances and your credit rating take a beating.

Regain control of credit card debt

Take a good look at your situation to determine what you truly can and cannot afford. By lowering the number of credit cards you carry, keeping your balance at one-third to one-half of your credit limit, and by shopping around for credit cards with lower interest rates, finance charges, and fees, you’ll be a wiser credit consumer and will get your finances back on track.