Credit Guard: How to know when to use your credit card

One of the age old adages about money and how to spend it centers on credit cards, more specifically when to use them and when not to.

As much as we debate this topic, the answer is fairly clear cut when you consider credit cards, interest rates and duration, along with debt to income ration and having the ability to pay off what you borrow in a short amount of time.

Credit cards essentially are a short-term fix, something that you want to use as a last resort and only for emergency purposes. Ironically, you should be using your own money for emergencies from that savings account or proverbial nest egg, but that isn’t always an option since more than half of the population doesn’t have a savings account.

That said, credit cards can be used in a pinch, for car repairs, home fix ups or medical issues, things like being off work or braces for the kids all at the same time.

When using a credit card, you have to consider that the interest rates on most cards is high, particularly department store cards. You want to steer clear of using a credit card and not being able to pay it off within 30 days. The trick is learning how to manipulate those highly marketable store cards when they offer you a certain percentage off what you buy if you open a store card. That is best for you if you can get the money saved and pay off the balance as soon as the first (and only) bill comes in the mail.

As you would expect, you should never use credit cards for things that are whimsical in nature or that aren’t tangible. For example, you never use credit cards for such events as vacations or to buy concert tickets or really anything entertainment related (again, unless it’s to get free bonus miles or points and pay it off as soon as the bill arrives).

If you are thinking about home repair, think home equity or another means of financing that isn’t credit cards. Plenty of flooring, roofing companies or even bigger box stores offer you special financing for these types of updates and upgrades to your home, so paying 21 percent interest on a Visa card is asinine when you consider other alternatives make more sense.

Credit cards aren’t evil, until they’re used for all the wrong reasons and you end up spending not only what you intended to purchase but the interest that compounds on top of it all.

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