A credit card can be a great financial tool, making your life considerably more convenient while also helping you to build your credit score. If you choose to use reward credit cards, you can actually come out ahead of the game. But if you allow yourself to get out of hand with them, even the best credit cards will bury you in a heartbeat.
Most people shouldn’t keep more than two or three credit cards. If you carry around more than that, pay them off and get rid of them. Keep your credit cards with the lowest annual percentage rates as well as your best reward credit cards and cut the other ones up.
The first credit cards to go should be your store credit cards, which typically charge higher interest rates, have few if any rewards, and can only be used in the stores which issue them. Next in line to go are your secured credit cards or other cards with low limits or high percentage rates.
Consider transferring your balance to a credit card which offers a low interest on balance transfers. Be careful, though. These introductory rates (which are sometimes as low as 0%) have led many people to believe that it’s OK to go ahead and rack up more debt. While there’s nothing wrong with carrying a manageable load of debt, it’s better to pay off your balances first, while you have the low introductory rate.
Credit cards aren’t the great evil that some debt counselors make them out to be, but if you borrow more than you can afford to repay, they can really make you regret it later. Here are a few good rules of thumb to stay out of trouble with credit cards:
- Don’t use a credit card for anything you can’t pay off in cash by the end of the billing cycle.
- Keep track of what you spend on your credit cards and review your expenses periodically instead of waiting for the monthly bill.
- If you find yourself unable to pay off your credit cards at the end of the month, stop using them until things stabilize for you.
Your credit cards can be one of your most useful financial tools, or they can be the shovel that buries you. The difference is how you use them.