- Personal Finance
Being Wise with Credit Cards
Credit Cards and Debt
Credit cards sure have changed the way a lot of people do their shopping. People use credit cards to pay for all kinds of things from food, to gas, to doctor's appointments, to shopping at the mall. When they were first created, they quickly spurred on a revolution in the way we do personal finance. Unfortunately, it also made it very easy to get into debt and accumulate a lot of it. Using your credit card or cards wisely is the key to getting the benefit without the risk. Its a good way to build up some good credit as well.
A brief history shows the credit card was introduced in 1959. People now could deal with their finances in a whole new way, and need not wait for that paycheck. Instead they could buy now, pay later. Depending on the person, this could be a good or a bad thing. Back before credit cards, you could do a version of this with layaway plans. Many stores still offer a layaway plan which is very smart of them to do. You still are paying off the item a little bit at a time, but you don't have the item in your possession until you fully pay it off. This still helps to appreciate delayed gratification, while spurring on the desire to pay so you can get your item.
Have we turned into societies where we like instant gratification to the degree we sometimes can't see the vicious cycle of wanting what we can't afford? I hope not. The key to not getting into debt is to pay on your regularly, and even better to pay it off as soon as you can. You get to keep more of your money this way.
Credit vs. Debit Cards
While they look and can sometimes "act" the same, a debit and a credit card are very different. Credit cards can include MasterCard, Visa, Discover, Optima, etc. With these cards, you receive an available credit line which is called an available credit, or credit limit. You can pay these off as you get the bill (recommended), or pay off smaller amounts as want to. You just have to pay the minimum amount due or incur fees. Your credit limit can grow to larger amounts over time.
Debit cards aren't really credit cards at all. They are more like check replacement cards, and the funds come from your checking account. This eliminates the need to write a check which is nice for many people.
Different stores have their own credit card for use in that particular store. These are fine and very helpful sometimes, but you can easily build up your debt with them in conjunction with your other credit cards. The key to staying out of debt or getting out of debt is to not use them very often and when you do use them pay them off as much as you can and as quickly as you can. You will be so glad you did, and also avoiding fees you might have forgotten were even there.
Currently, I am seeing some Department stores that have no interest applied to their accounts. This is wonderful news, and makes me want to do more shopping at that store. This one store in particular also has no hidden fees. You can't ask for much better than that. Pay close attention as some other department store's interest run very very high.
The basic rule of thumb is to really consider your needs versus your wants in life. The "wants" can wait, but you may have needs creep up that you didn't anticipate. Be abreast of your financial situation and pay your cards off soon as you can.