For many with burned fingers will tell you they didn’t realize that things had gotten so bad until very late, because most credit card offers try much to sound like they are actually running a charity. Well, they aren’t.

And this is not a hate campaign against credit cards. Surely they have their benefits – in America if you want to rent a car, you sometimes need a (major) credit card.

But, consider this scenario:

You receive an offer in your mail that sounds good, maybe it’s a new generation TV or a new fridge. But it costs $2000. Oh, but you have a credit card with a $5000 limit, and you immediately purchase your merchandise. Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum of total balance (usually 2 percent) of the total per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only 10 percent towards the principle. As a result, you will take 30 years to repay and end up paying over $5000 interest.

Sounds scary? It doesn’t have to be. The moral of the illustration is use the credit card the same way porcupines make love; very, very carefully.

Credit cards can be useful when used judiciously. Try to pay off your balance every month to avoid interest charges and to keep your balance from growing into an unmanageable amount. Prudent use of your credit card now will save you many headaches down the road and will build an excellent credit score.

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Always plan for the purchases that you need and those that you want. You need the essentials, and you want everything else. The ability of making a distinction might help you plan wisely.

If caught up in financial difficulties, it’s always good to talk to the issuer who might re-schedule your payments. If you simply default, that only helps to build up an unfavorable credit history and you might find yourself being denied credit next time.

Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within the manageable levels, say within 30 percent.

And if your mails are flushed with more favorite deals than you currently are enjoying, you may approach your issuer for a better deal. They want to retain you as their customer, so they will listen.

Credit Card Dont’s

Do not use your credit card to make household purchases. It’s expensive in the long run. Try to save up in cash what you need to buy the appliance used. Also, having cash to bargain with often helps negotiate a better deal!

Do not just pay the minimal amount. You will end up paying exorbitant interest. The quicker you clear the debt the better. So always try to pay more than what they ask you for. Remember, their goal is to keep you paying interest to them as long as possible. You defeat them when you pay more than your monthly minimum because you will have a zero balance with them that much sooner!

Do not use the credit card to purchase things you can’t afford. We’re often tempted to buy things we can’t afford with credit. But usually we don’t really need those items anyway. If we sacrifice a little now, we’ll be so much further ahead in the financial game later.

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credit card apps

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First and foremost, compare the interest chargeable for all the credit cards for which you are eligible. While the rate may not remain fixed indefinitely, it’s always advisable for first timers to go for the one charging lower rates.

Always be sure to read the fine print, especially on the other charges that may be charged on you, like late-payment fees, annual fees, and whether there is a grace period which is normally given before the finance charges kick in.

Decide what limit is appropriate for a person of your income. Also realize that the fewer credit cards you have, the better placed you are to track your spending and keep up with due dates. Sometimes your monthly bill may get delayed or, if you’ve recently had a change of address, get returned altogether. By the time your credit card company contacts you about it, you’ll likely already be a couple months behind and will have incurred late penalities and put onto the higher default interest rate. So be sure to not just rely on getting the bill as your reminder!

Compare the services and other features such as the cash back incentives, or warranties, rebates and the like.

Check whether the card is widely accepted to enable you to pay for your needs.

You will do yourself a favor by familiarizing yourself with the following terms.

Annual Percentage Rate. This is the measure of the yearly cost of credit.

Finance Charges. These are the total charges involving the transaction. This is the period the issuer gives you before he starts charging you interest on new purchases. Note that not all credit cards have a grace period.

If you keep all these criteria in mind when selecting your first credit card, you’ll be well on your way to a choosing wisely.

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