A Short Guide to Credit Card Use

By Omer Cetin on June 26, 2017

How to use and profit from credit cards without going into debt

Although credit card use is higher than it has ever been, more people are carrying a substantial amount of debt on their cards. The subprime crash of 2008 and the following crisis still has profound ramifications on the people who were affected due to their overextension.

Having a credit card can be an incredibly handy tool. It is an effective way to establish and build credit for the times when cash payments are unrealistic. Homes and new cars generally cost more than we have in our bank accounts and having a good credit rating will make it much easier to get a loan from our bank or financial institution when the time comes to make the purchase.

Credit card hazards and fraud

Credit cards are becoming safer to use and current technology is minimizing credit card theft and fraud. Granted, no system is perfect but the introduction of the EMV (Europay, MasterCard and Visa) chip has made it much more difficult to read cards from a distance. The magnetic strips on older credit cards were susceptible to being read from a distance and more prone to theft.

The adoption of the EMV chip has sent credit card fraud online where remote sales can be rung up without the presence of the credit card. In that case it doesn’t matter whether you have a magnetic strip or a chip.

What you should know about having a credit card

The first thing everyone should know about credit cards is that you are borrowing money and it must be paid back. With interest. Anytime you use a credit card you are entering into a contract to pay back the money you are spending. Using this responsibly will raise your credit score, while irresponsible borrowing or not paying the loan back will have a detrimental effect.

Educate yourself on credit card use. Understanding how credit cards work – how interest is charged, what fees are added, how minimum payments are determined and why your due dates are when they are – are just a few of the complications of using plastic.
Choose your cards wisely. Not all credit cards are created equal. Learn to know the differences in interest rates, fees and limits that different credit cards use. Having a nominal APR (annual percentage rate) of 12 percent is great, but if the effective APR – which is the fee plus the compound interest – is higher, you are losing money.
Limit the number of cards you have. Having too many credit cards can be as bad as not having enough. The more cards you have the easier it is to charge your purchases.
Track your monthly credit card use. Check books may be a thing of the past, but balancing your income versus the money going out was a skill that they taught us. Every time you made a purchase, you wrote it down. That is done for you electronically these days, but it can lead to forgetting about some purchases and spending more than you can afford.

Many credit cards offer perks for frequent travelers or users of their cards. These credit card offers for fair credit can give you a way to offset some costs just by using your card. Although many of these cards are a good deal, make sure that you will use the offered service frequently enough to make it worthwhile.

Credit cards are tools to help you establish and maintain your credit rating so that you can purchase high dollar things that are out of your immediate reach. Choosing the right credit card and making sure it is used responsibly is a skill that many of us never learn.