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When
you apply for and receive a
credit card,
you will want to take the time to create a
detailed budget for your family’s finances.
Without a budget, and without carefully planning
the credit card expenses, you could fall into the
credit trap that many individuals have found
themselves in. Swimming in a sea of debt that they
have no way of getting out of. Having a credit
card is a wonderful way to ensure that you have
access to funds in the event of an emergency, or
for use when traveling to eliminate the need for
carrying cash on your person. As long as you keep
the card for the purposes outlined in your
personal budget, you will have no difficulty
maintaining your credit card balance, making
payments on time and using the credit card to it’s
fullest financial capacity. If you start using the
credit card as if it was your personal
debit card,
you will likely find yourself in financial
trouble.
Personal Budgeting Tips & Tricks
First, and most importantly, never spend more
money than you can actually afford. This is easier
said than done of course, especially when you
include
credit cards
in the equation. It’s very easy to buy now, with
the intent of paying later, only to find out when
later comes you still don’t have the money! Using
credit cards wisely however, can save you
finance charges
and enable you to make purchases and build your
credit by making monthly payments in full and on
time.
If
you already have a credit card (or two) with
balances, you should consider shopping around for
credit cards that are offering promotional rates.
Many companies will periodically offer a 0%
balance transfer
rate for all new customers who apply for and
obtain their credit cards. Transferring what you
owe from one card to another can help you save on
interest and help you pay down your debt faster.
This is a smart way to use credit cards!
Understand your credit card limit. Just because
your credit card has a limit of $5,000 does not
mean that you should spend that all at once!
Ideally, a credit card should be used with the
intent of the individual paying the balance in
full at the end of each month. This will avoid
finance fees, interest charges and allow you to
make purchases on your credit card that are the
same as paying with cash. As soon as you allow a
balance to carry over from one month to the next,
you are going to start seeing your account balance
increase, instead of decreasing with your
payments, thanks to high
interest rates
and finance charges on purchases.
When determining how much money you have available
for purchases, you should first make a list of all
of your outgoing expenses each month. Be sure to
plan for incidentals and things that don’t occur
regularly- such as oil changes and car tune-ups.
Also, consider your personal savings a monthly
expense. (Just because you don’t pay them monthly
doesn’t mean you shouldn’t plan for them monthly!)
Then, determine your monthly income. Subtract your
expenses from your income to see what you have
left over, and this should be your flexible
spending amount in your budget. Even if you have
access to a credit card, you should never spend
more on a purchase than this “flexible” money.
This will keep you from getting into serious
financial trouble.
When you take the time to create a budget and
follow it you are a responsible credit card user
who will likely not end up swallowed by the
dreaded debt monster!
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