5 Things to Know About Credit Cards

Day 6: 30-Day Financial Wellness & Home Ownership Series

Credit card debt is easy to rack up and hard to pay off. If you’ve ever had it, I’m sure you know this. If you haven’t, you’re blessed and keep it that way. There are good and bad things to know about credit cards so that you can be an informed user.

There are some people who detest credit cards and there are some who use them for their benefit. I’m not one to tell you not to have a credit card because I have three. Each of them play a certain role in my financial life. However, I do plan to cancel one eventually. I just need to decide which one because they are all “good” cards. I’ll talk about the “benefits” below.

And yes, I’ve had credit card debt and in the final stages of paying them off. So, when I tell you that if you rack up debt, it will take time, sacrifice and effort to pay them off, do know that I have experience with this.

No, I didn’t use them to go shopping. There was a time in my life where I used them for basic expenses but moreso I used them to help other people. This is not smart so don’t you do that. If you don’t have the cash to give to someone, then don’t “give” them a loan from your credit card. It won’t work out in the end for you, and you’ll have strained relationships. And you shouldn’t “give” or “loan” your money to others that put you in a financial bind. What good is it for you to have “saved” someone else, but you end up struggling and there’s no one to help you. Don’t do it.

I also partially financed a bad business deal with my credit card – bad as in I trusted a “business partner” who doesn’t even know how to handle business. Whoops! Found that out the hard way. Another not so smart decision. I do believe that I’m done with that part of my life – being super trusting of other people and making bad financial decisions.

As I’ve told you before, my financial picture isn’t rosey. But I also don’t want you to think that it’s at the worst end of the line because their are people who have bigger issues than me. Though the above is about the worst of my personal finance journey, I’ve learned a lot. So, I’ll take it as a testimony and use it to help others like you.

5 Things to Know About Credit Cards

Interest Rates

Credit cards have interest rates ranging from 0% to 30% or more. Most 0% cards are introductory rates that rise after a certain length of time. So, the regular rate will depend on your credit score as well what’s happening in the financial markets. If you think your rate is too high, you can call the company and ask for it to be lowered. If that doesn’t work, you can either wait it out or apply for another card. Be careful though because if you’re concerned about your credit score, applying for credit is considered a hard hit and too many can decrease your score.

Always stay on top of the financial terms of your credit card including the interest rate, your due date, and minimum payment. The ideal thing to do is pay your card off monthly. But if you have a balance and working to pay off the card, pay more than the minimum but pay at least the minimum so you’re not hit with late fees.

If you have an introductory rate, be sure to know when that rate expires. You want to be sure to have taken full advantage of it by paying off the credit card before the interest rate increases.

Minimum Payment

As stated above, you will be given a minimum payment to pay each month if you carry a balance. The key thing is to not carry a balance, but pay off your card in full each month. Only paying the minimum payment will have you paying on the card longer. The longer you pay on the card, the more money you pay in interest fees.

Map out a plan to eliminate your credit card debt so you can pay as less interest as possible. Remember patience, sacrifice, and dedication. You’ll need it here if you have a huge balance to repay. But it’s worth it to gain financial wellness and focus your money toward other areas like savings or to purchase your home.

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Rewards

Some credit cards come with enticing rewards. If you have stellar credit, then you probably have a card or are eligible for cards with cash back offers, hotel points, air travel points, concierge service, etc.

I stated above that my three cards each have a role to play in my life. One card gives me cash back, two offer very attractive balance transfer offers, all provide travel insurance, and they all have good regular interest rates among other things.

Let me say this about balance transfers: do not get in the habit of racking up debt and then just transferring it from one card to another that offers a lowers interest rate. That may be good to do once or twice to gain your footing, but you want to pay that card off. I’ve done this several times and it just fooled my mind like I was making progress. No, I believe it actually slowed up my progress. So, again the main thing is to carry no credit card balance.

Benefits

This is sort of an extension of rewards. I know some people don’t like to use credit cards at all for various reasons, and I understand that. However, I love having my cards and that could be do to comfort but if you use them right, they can be beneficial to you.

When I say use them right, some will say there’s no right way to use them. But let’s face the facts, credit cards aren’t going anywhere. So, use them right by making purchases that are meaningful to you, and not to your detriment. Don’t go on a whirlwind shopping spree knowing you can’t pay that money back in one month.

Pay them off each month. Carry no balance at all.

Pay credit cards off each month. Carry no balance at all. #financialwellness #30dayseries #natashavip Click To Tweet

The main benefit I’ll say here is that I have friends who use them to pay all of their bills. This does two things: it gives them an end of the year summary of expenses in one place and it builds up their cash back or reward points for hotels/air travel.

Liability

I once had a Citgo gas card years ago while in college. I’m relaxing at my apartment one day when I review a statement that came in the mail. Well, that’s funny I thought to myself because I hadn’t used the card. It should have a zero balance. Someone was living it up in Miami, Florida with my card.

Listen, I had my card right in my wallet. I had the only copy as far as I knew so how did someone end up going on a gas-buying, convenience store shopping spree on my behalf? To this day, I still do not know. At the time, I suspected maybe it was an employee of the company but you just never know. The good thing is Citgo wiped out the debt and I was not responsible for any of it.

That’s what you want to make sure you have with your credit card. Some cards say you’re responsible for up to $50 if fraud occurs. So not fair especially if it’s indeed fraud. I don’t know of anyone who was actually made to pay anything once the credit card company finished up its investigation.

So, just make sure you read the terms of your credit card so you’ll understand what you’re liable for and other small details.