Every Credit Card Owner
Should Know These Things

Credit cards can be very useful, as many of us seniors have discovered. They can make paying your bills so much easier.  They can make tracking your spending much less laborious.

Like so many other things, credit cards have the potential to bring on great grief.  Improper use of credit cards can be financially catastrophic. 

If you have a credit card on your person while shopping, the temptation can readily suggest that with the credit card, you can now afford to buy it – even if you really can’t. 

Life happens and emergencies happen. That’s why it’s important to have the habit of regularly saving to create an emergency fund for the purpose of dealing with emergencies.  It’s not a good idea to depend on a credit card to deal with emergencies.

It’s important to select the right credit card for your use. This can be complicated because the cards for which you qualify are limited by your credit score.  You need to compare the APRs (annual percentage rates) of various cards and various fees including annual fees charged by the car

Suggestions to Help Manage Your Credit Card(s)

   1. Pay your bill on time every month.  If you pay the total statement, there is no charge for usage.  If you cannot pay the entire statement due, then pay more than the minimum.  This will keep you from paying excessive late fees and also save you money on interest fees by paying off the bill more rapidly. 

   2. The BEST way is to pay the TOTAL bill in FULL every month.

   * For example, if you have a $500 balance on a card with a 15% APR, you would end up paying $595 over two years if you make the minimum payments of $20/month.

   * However, if you make payments of $50/month instead of the $20 minimum payment, you would end up spending a total of $528 to pay off your balance in a little less than a year.

   * Be consistent with your payments. Missing a payment or paying less than the minimum will negatively impact your credit score.

   3. Keep your balance as low as possible. Your credit score goes up if you keep your balance relatively low compared to your available credit line. Ideally, your balance should be less than 30% of your available credit line.

   * Avoid maxing out your credit card or making large purchases unless you plan on making a significantly larger payment to cover these expenses.

   * Consider applying for a credit line increase if you cannot pay off enough on your card to stay around the 30% mark.

4. Read the fine print on rewards cards. Credit card providers typically charge higher APRs and fees to compensate for the cashback and other rewards.

   * The best strategy for using a credit card with rewards is to make enough purchases to qualify for the rewards, but then pay off your balance in full every month to avoid paying interest.

5. Keep it simple. Owning too many credit cards can make managing your accounts difficult. You'll be more likely to miss a payment.

6. Be careful with balance transfers. This can sound like a good option if you qualify for a credit card with lower fees and APR. However, most credit card companies will charge you a transfer fee, which is usually a percentage of the debt you are transferring. Paying 3% of the amount you're transferring to get a slightly lower APR might not save you money.

7. Avoid cash advances on your credit cards. A cash advance can be a tempting option because this cash is very easy to get, but you'll have to pay a fee and will have to make larger monthly payments to compensate for this charge. Cash advances often have a higher rate of interest as well.

Shop around for a better credit card every two years or so. You will qualify for better products as your credit score improves from following these strategies.

These tips will help you stay on the right track with your credit cards. Keep in mind that you can easily avoid fees and spend less on interest by being responsible and planning your expenses and payments in advance

As a senior, I have learned to spend no more on a credit card each month than I afford to pay off at the end of the month because I refuse to throw money down the rabbit hole of interest.

Please share your thoughts and any response you may have in the form below.

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