A credit card can really come in handy for regular spending and for the occasional unexpected expense. But a cardholder who regularly treats their credit limit as extra income is likely to end up buried in a mound of debt.
Credit cards make it easy to pay for and keep track off everyday expenses such as gas and groceries. Using a credit card for expenses already accounted for in the budget is a smart way to use a credit card.
Avoid Taking Cash Advances
Cash advances, including convenience checks, are the most expensive way to use a credit card. The interest rate is usually much higher for cash than for purchases, and cash advances do not get an interest-free grace period like purchases do – interest begins to accrue immediately.
Pay in Full
The minimum payment is designed to keep cardholders in debt for years. By paying the entire balance each month by the due date, the cardholder avoids paying any interest at all – borrowing somebody else’s money for free each and every month.
Study the Monthly Statement
Look beyond the payment and due date for each monthly statement. Be aware of the interest rate, especially if a balance if carried. Take notice of spending on gas, groceries, clothing, going out to eat, etc. and adjust the monthly budget if necessary. Also check that are no fraudulent charges, and report them to the card issuer if there are.