Having a credit card on hand is pretty convenient. In fact, many people find it inconvenient to carry cash or pay with cash, they would rather carry a debit or credit card. Whether credit or debit card, either could be trouble if not used carefully.
A debit card pays directly out of your account. However, there could be problems if you overdraw from your account, especially if you don’t have overdraft protection. In fact, you could build up some pretty hefty fees if you overdraw from your account.
Credit cards work similarly to the debit card. They are convenient to use and there is usually a spending limit. If you go over that limit you can be charges some hefty fees. If you don’t pay off the card balance each month and only pay the minimum payments, you finance charges could soon get out of control. Does any of this sounds familiar you? Here are some guidelines to help you avoid financial a catastrophe:
* Pay the full balance due on time each month.
* When there is a remaining balance at the end of the month, unless it’s a big emergency, don’t use the card again until the card balance is paid in full.
* Use only one credit card and have a low spending limit.
* Don’t apply for credit cards at retail stores, most have a high interest rate.
* Don’t use one credit card to make a payment on another credit card.
* Don’t buy gifts with a credit card. It’s easy to feel generous when you use a credit card to make a gift purchase.
Make a budget so that you can monitor your spending habits. On one side list the necessities such as; rent, utilities, groceries, medications, insurance, and car payments. On the other side make a list showing your spending for non-essentials such as; recreation, meals, gifts, or that cup of expensive coffee each morning.
You may find that after monitoring your monthly income to your monthly expenditures, you can begin to see where unnecessary spending can be cut and used to pay off your credit card balances. You may even find that you can save more for those big purchases you’ve been wanting or that you can save more towards your future retirement.
At Summit CPA we offer multiple resources to assist you with your financial needs. If we can be of assistance, contact our office at (866) 497-9761.