Debt is good – as long as you are the one calling the shots. Many people struggle to find the balance of using their credit cards without falling into serious debt. Effective management of credit cards, wise like Yoda, you do not have to be. We'll show you how to control your credit card and not vice versa!
The first rule for handling credit cards is to always, always, always pay off the entire balance every month before the due date. Any balance you leave on your account after the grace period is subject to finance charges which can add up very quickly. So yes, I don't mean to sound like a nag, but pay off the whole amount. Never carry a balance. No two ways about it.
Next, just because you're not handling cash doesn't mean that you can spend frivolously anytime you want. You should still have a budget that you stick to. 0% instalment plans make things very tempting, but do you really need another $2,000 bag? It may sound elementary, but think twice before buying. Spend only what you can afford to pay back in full at the end of the month.
They will lure you with freebies, rewards and points, but keep the number of credit cards you own to a maximum of three. Not only will it reduce your urge to spend beyond your means, it also means you have less bills to contend with at the end of the month. Consolidate your payments (especially recurring bills like insurance, internet and handphone) on one or two cards so you can maximise the points awarded to you.
If you haven't already, please advocate for your rights as a credit card holder by asking for lower interest rates or waivers of annual fees. As long as your credit is in fairly good shape, most companies are willing to negotiate the details rather than lose a customer. If the company refuses to waive your annual fee, simply terminate and apply for another card that comes at no charge.
Read your monthly statements thoroughly to make sure all the charges were authorized for the correct amount and not subject to unexpected fees.
Lastly, if you are the kind who really can't help yourself, stop using your credit card. Remember that scene from Confessions Of A Shopaholic where Rebecca Bloomwood literally froze her credit card in the fridge to stop herself from shopping? I'm hoping you don't have to resort to that, but at the very least, take a break from using it until the balance is paid down to a manageable level.
The power to manage your credit card is in your hands!