SAVE|MONEY

Credit is part and parcel of today’s way of life. The use of credit cards is now a commonplace. This often leads to increased spending, so it’s vital to learn how to handle credit wisely if you are to manage your money well.

In many minds, credit is thought of purely as installment buying. However, credit comes in many different forms. It can be a cash loan, a charge account, a credit card, or deferred payment for services, such as dental treatment. One kind of credit might cost you less than another kind, but all credit costs something. You can make a savings by shopping around for the cheapest credit— but you’ll save the most by using credit wisely. This means that you should not borrow money except for emergencies, and that you should buy for cash whenever you can. Limit your installment buying, and stagger major purchases so that you aren’t trying to pay for a car, a freezer, a stereo set, and a bedroom suite all at once. When you must use credit, shop for the best buy.

One of the first things you will discover when you begin shopping for credit is that lenders want a solid citizen—someone who stays in one place, holds a steady job, and shows no inclination to skip town with the cash. A secretary, even if she has only been working a short time, usually has an easier time getting a loan than an entertainer. Even if they have been at it for years, entertainers are generally considered bad credit risks because they often have long periods of unemployment, whether or not they make a lot when they do work. Anyone who owns a house finds it easier to get credit than someone who rents. Anyone living in a furnished room is suspect in the eyes of lenders, who assume the prospective borrower has never been able to get together the cash to establish a real home. A credit record, like your general reputation, follows you throughout life.  You have to work to keep your record good, but, if you want the things credit can bring, it’s worth the effort.

How Much Debt Can You Handle?

Economics experts say that a person can usually manage debts up to 20 percent of take-home pay less any mortgage payments. This applies to you only if you can be reasonably sure that your income won’t take a nosedive, if you have adequate health insurance, and if you have a nest egg for emergencies. These are important, and, because no one can be sure what the future holds, it is safer to keep your debt load between nothing and 15 percent.

Know How Much Interest You Will Have to Pay Out

Different lenders have different ways of applying interest charges, and as you shop for credit, you may find yourself confused by annual percentage rates, unpaid balances, and true costs. You’ll wish you had paid more attention in high school math class, but it’s not too late to learn.

One general principle to keep in mind is that monthly interest rates are often quoted at 1.5 to 2.5 per cent per month. Sounds cheap. Is it? Those percentages are only for one month. To find the true cost, multiply by 12. The cost at 1.5 percent per month is the same as 18 per cent per year true interest. At 21 per cent per month, the true annual interest is 30 per cent. Monthly rates of 1.5 per cent are often charged when you pay interest on the unpaid balance, as for many department store charge accounts, credit cards, and installment plans.

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Credit cards are today’s mans’ best friend and enemy. If properly managed, credit cards can be your lifesaver when times are tight.

Recent reports show that more and more Americans loved the plastic, which is popularly known as credit cards. As a matter of fact, there is at least one credit card in every household which comprises about 81% of the respondents. Credit cards are the top choice for their convenience in shopping and paying their bills.

The convenience of payment terms for credit cards makes them an indispensable tool for almost everything. Average balance of most American credit card holders amounts to $8,000. This is indeed, a great amount of debt.

Cutting back on your expenses and avoiding debts as you can, could save you money. Here are some tips on how to do that.

1. Choose the best credit card

With all the snail mails, emails, and phone calls from credit card companies offering you their plastics, there should be one credit card company that will suit your needs. Credit cards are not created the same and having this card will open to more controlled expenses, rewards, services, and interest rates.

For example, if you want to curtail your shopping expenses, get a card that provides limit in your shopping spree. This way, you will not be spending too much on anything beyond your credit limit, which will make your debts manageable to pay.

2. Go for the lowest interest rate

There are times that you will not be able to pay your bills on time but you are willing to pay your balances in another period. Find a credit card company that offers the lowest interest rates.

If you noticed, interest rates are the main culprit why your debts are soaring high. Interest rates are added in your actual balances making it worst to see.

3. Getting rewards by choosing the right credit cards

More and more credit cards are offering rewards to their patrons, but not all kinds of rewards will be beneficial.

For example, if your credit card offers a frequent flyer’s rewards and you are a frequent traveler, getting this card will give you dozens of discounts and accumulated points, some of which offer a ticket conversion for your next travel. With the rising cost of airline tickets, this is a great treat.

4. Keeping your list of expenses

You might be tempted to swipe your card everywhere but do not forget that every swipe you made holds a responsibility to pay in the future. Keep track of your expenses.

After a weeks’ recording, you will be able to identify that you have made purchases which are not actually important. The next time around, you know how to avoid it.

5. Avoid having balances

Try to clear your balances in your credit card statement each month as fast as you can. Accrued balances are carried over in the next billing cycle.

Although you are allowed only to pay a minimum balance, in the long run this will not do any good. As a matter of fact, it could only add up to more debts in the future. Remember, accrued balances will be subjected to interest rates. A zero balance will not be charged of any interest rates, thus saving you money.

6. Avoid cash advances if you can

Almost all credit cards allow you to make cash advances. But unless it is an emergency, you should avoid doing this. As you may know, cash advances on credit cards have higher interest rates than actually swiping your card on purchases.

Never combine these two if you want a debt-free life in a year. This is because most cash advances have shorter terms and will be charged immediately. This will be very hard in your part especially if you are now prepared to pay your balances.

7. Ask for a lower rate

If you have been diligently paying your bills on time, asking your bank for a lower rate might be fruitful.

According to one survey, around 55% from those who participated reported that they have successfully lowered down the interest rates by simply requesting the company to act consequently.

A lower-interest rate means a chance to save extra money, especially if you are a type of debtor who does not pay balances on time.

Those are the 7 proven tips which will help you cut back on your expenses and allow you to save more with your credit cards. It is now up to you to make your choice and act.

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