The Self Improvement Blog | Self Esteem | Self Confidence

Whether you want to start a savings account, create a business, or invest in higher education, one of the most important steps you can take is to avoid Credit card debt. One study revealed that uncontrolled credit spending is among one of the most common reasons people must eventually declare bankruptcy. Credit cards and personal loans can be helpful for securing funds when you need them the most. However, it is wise to become credit savvy and keep a few spending tips in mind to help create the foundation for a healthy financial future. Here are some tips for using credit wisely

     1. Make Interest Charges a Priority in Credit Spending

 Before you make a purchase with a credit card, consider how the current interest Rate will affect the amount you pay back. For example, if you want to charge a major purchase on your card, such as a new bed or a dining table and take longer than one billing cycle to pay it off, the interest rates may raise your monthly payment amount and make it difficult to catch up.

You may want to consider working directly with a retailer when it comes to making a major purchase, especially if they offer you a superior interest rate or withhold those charges for several months. For example, if a retailer offers you interest-free payments for twelve months and you pay off your purchase before then, you will have avoided paying credit card interest and prevented the long-term debt it can cause.

2.      Avoid Charging Everyday Items

One way to sink into credit card debt is by using your cards like cash or a debit card. If you have ever charged gas, snacks, other items you normally budget for but find yourself short on money, this habit can cause interest rates to rack up quickly. While you might not think twice about charging a small amount to your credit card, it can build debt that may take years to erase.

For example, if you charge a total of $120 for everyday expenses one month and your card carries an 18 percent interest rate, you will be charged $22.50 in interest unless you pay off the entire $120 before the end of the next billing cycle. If you make a minimum payment and continue to make small charges, the interest may end up costing you twice or even three times the amount of the cost of the original purchases. Learn to create and manage a viable budget to avoid this vicious circle of overspending and interest debt.

3.      Evaluate Terms and Compare

It can be difficult to know whether you are getting a reasonable interest rate on a loan or credit card unless you take the time to understand the terms of each offer. Ask the lender questions, make notes, and use them to compare which cards or loan rates are the most competitive. Beware of being drawn in by credit card rewards, as many carry restrictions that may surprise you later.

4.      Research Loan and Credit Card Companies

Knowing as much as possible about companies that offer lines of credit can help you decide which one best suits your financial status. Read up on their histories, consumer reports, and CEO core values. For example, Eugene Chrinian, the CEO of Ashley Furniture HomeStores, values strong leadership tendered with Christian ideals, and learning these details can help you feel more confident about choosing a consumer lender.

5.      Make Payments on Time

Neglecting to make credit card payments on time can cause late fees to pile up. These charges, compounded with interest, can make the total cost of your debt soar. Be vigilant about your payment date or use an autopay option, if available, to ensure you do not miss it.

Using credit can cause a significant amount of debt. However, when used wisely, it can be a beneficial tool for building a solid financial foundation for the future.