It’s Christmas Time Not Credit Card Time!
I already spoke about gift giving and how to remain aware of what we’re spending, what we’re buying, and where that money is coming from in my post 2 weeks ago. Now, I’ll preach about the dangers of Credit Cards and debt! But we need to know a little bit about how they affect our financial lives so that if we do use credit cards, we will know how to use them wisely. But first a disclaimer!
These are my rules for using Credit Cards:
- Never in a restaurant
- Never for Down Payment on any Purchase
- Charge only what you can afford to pay off that month
- Pay each bill on time
- Pay off credit card debt as soon as you can
- Don't just pay the minimum
- One card only
- Check your statements each month
- Avoid cash advances
- When using a Credit Card ask yourself “why am I using a Credit Card for this”
Credit cards can make your life better -- or worse -- depending on how you use them.
Now then, one of the perks of running a business in Beverly Hills is the people I was able to meet. Not just celebs but the everyday people who keep the world running like my dear friend the Business Bank Manager- nowadays her body is as tight as her mind is right.
She told me something I’ve never heard before about credit cards, she said that “if using a credit card makes you feel like an adult or a member of the club then you need to stop using credit cards. This is a common indicator of future problems with credit. There are healthy ways to evolve as women and revolving credit isn’t one them. Go Earn. Go Save."
But if you know yourself and understand the uses of credit then keep reading.
She continued to explain that people often get the idea of responsibly using credit cards confused with the idea that carrying debt month to month improves your credit score. Use your credit card, make a few purchases and then pay that off each month, the credit bureaus will report that you are using credit. Carrying a balance doesn’t do anything but increase your minimum payment each month.
In your credit report, you'll see two figures in each credit card listing. There’s the current balance and alongside that is the high balance, which is the highest amount you’ve ever used. This isn’t necessarily the balance you carry month over month, it just shows your highest balance. These figures show potential Creditors that you're actively using your credit cards, or that you have been using your credit cards and most importantly your payment patterns/history. You don't need to show that you don’t mind carrying a current balance to you need to demonstrate that you pay your balances off.
For the record, showing your ability to manage debt is important. A history of managing debt is the best way to protect, grow, and maintain your credit score. It’s more difficult for new car buyers who don’t have a credit score to get a loan. It's certainly a useful thing to have a credit score and to have carried some debt to do that. But you don't have to keep a credit card balance month to month to achieve that. It makes life a lot easier to have a credit card but it's not necessary or a good idea, for obvious reasons to carry a balance on said credit card.