Responsible Credit Card Use

Recently, I had the experience of being offered a discount at a clothing store, if I would just sign up for their credit card.   I did it to get the 20% discount they were offering.

I don’t like opening a new line of credit for any reason.   I paid the entire bill off before the billing period ended so that I wouldn’t be charged any interest.

This is the secret to responsible credit card use.

Now days, many companies are charging VERY high interest rates on their credit cards.  It would be best if you did not run monthly balances on your credit cards.

The interest is just plain not worth it.  I feel your pain, if you are one of those people who is stuck with a whole bunch of credit card debt and you keep getting into situations where you add more.

This is something that you absolutely must stop right away.   It is a path to a bad end.

The road to recovery will also be painful.  But there is no point in putting that pain off until later.  You’d better start right now and dig yourself out of that big hole you have created.

It could mean saving and scraping every penny.  Give up on cigarettes, drinking, and other vices.  Aside from saving the cost of those vices, you will also be doing something good for your body.

If you are a coffee shop junkie, it is time to give that up as well, at least until your credit card debts are paid off.

You may have heard this advice before, but it is worth repeating:

1.  Take your highest interest card and pay that one off first.

2. Take the next highest one and pay that off as well.

3.  Move on down the list until you have all of them paid off.

Think Extra Income

Think about picking up an extra part-time job.   You might also consider doing short contract work.  Even if you think there isn’t work you can do available, you might be surprised.

There are people who are willing to pay for work over the Internet.  You’ll want to go through a respectable third party company that will ensure you get paid for your work.

Between cutting back on your expenditures and picking up some extra work,  you might be surprised at how much of a dent you can make on those credit card bills.

Bottom Line

Pay off your bills at the end of the billing cycle, do not carry a balance.

If it is too late for that and you are already carrying excessive balances, you must pay them off before things get worse.

Once that is done, then you want to work on building up some savings,  a cushion to protect you from short term cash needs that might be tempting to use your credit card for.   Now is the time to start working on the problem.

You may also be interested in reading:  Using Secured Credit Cards to Build Or Rebuild Your Credit

If it is already too late, you might find Jimmy’s credit repair story interesting.

Leave your comments below.

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Comments

  1. says

    Dave, another interesting article! I keep a few credit cards to help keep my credit score up. I hate retail cc’s though. A long time ago I was tricked into getting one at Macy’s. haha!

    Just to echo your point of prioritizing debt. If you’re putting money away at an interest rate that is lower than your debt’s then you’re doing it wrong.

    • says

      Hi John, that is an excellent point. On the other hand, one could have a larger loan with a larger interest rate, but the size of the loan could make it such that paying off the smaller interest loan first makes sense.

      I think it all changes with the situation at hand.

      Thanks John, good to hear from you.

  2. says

    Your universal advices could be really helpful to avoid the credit card debts, I wish I had read your article a few months ago when I got stuck in my credit debt. Great and useful article, I bet it will help many people.

  3. says

    Dave America needs to continually be reminded about debt. I listen to Dave Ramsey sometimes and he changed my whole mindset about debt. I am still working on some things but for the most part I am close to being debt free.

  4. says

    Dave, your advice is so simple, yet so many people get into trouble with credit cards. Years ago I read a book that classified borrowing into two classes, 1) consumer credit (for consumables like clothes, food, trips, etc. typically using a credit card) and 2) installment loans (for a home or a car, for example). Number 1 is like shopping in a convenience store, higher prices for “renting” the money, and to be avoided like the plague if you can’t pay off your credit card at the end of the month. Consumer credit interest is not tax deductible.

    Borrowing Number 2, a home mortgage or car payment has a much lower interest rate, allows you to make use of a purchase while you slowly pay it off the loan in manageable installments. This kind of borrowing will get you into a house that you “own,” and mortgage interest is deductible on your taxes. (Rent is not deductible.) This kind of borrowing, as long as you can make the installments, is not to be avoided. Real property holds its value, often goes up in value, and the principle you pay back on the loan also increases your equity. What stops people from buying a house? You need to put about 20% down. People have trouble scraping that together. But if you stop buying luxury coffee, take a lunch to work, and save, you can amass a down payment. Your financial picture changes dramatically when you buy a home. Being in debt to get a house is not bad. Being in debt to buy coffee is bad. Learn to make coffee at home! Keep your credit score clean, pay your bills, or you may not be offered a home loan.

  5. says

    Hi Dave,
    The best thing is to paid off all bills before it’s end date so that no interest will be charged on you but it is the most difficult thing for those who suffer as a result of debt and the main reasons are they don’t do Budgeting and have high spendings and no savings. These people could solve their problems by doing extra works and changing their habbit of higher spendings and no budgeting. I liked the advice that you repeated here, one could get relief of his/her debt if he/she follows this advice.

    • says

      Hi Pete, many thanks for your comment. It can be difficult and the longer a person puts off tackling the problem, the harder it can get. It is imperative to have positive cash flow – more coming in than going out.

  6. says

    Maybe credit cards are addicting once you’ve tried it. Since there are people who looks very happy when they have several credit cards. :)

    Maybe it’s a nice idea just to have 1 or 2 credit cards. What do you think?

    • says

      Yes, I do think you should have one or two for emergencies and for those odd times when you run out of cash in your wallet and there is no ATM around. It’s definitely worth it to have a one or two. But I think the danger is in keeping a running balance every month.

      That’s great for the CC companies but horrible for our personal finances

  7. says

    It’s kind of sad that many stores actively encourage people to sign up for their card when they know that lots of people who do so will add to their debt woes by getting it. Seems like the opposite of good customer service.

    • says

      Hi Thelma,

      consumers are sought after to buy all types of product. Credit is just another ‘product’. But the costs can be MUCH higher than the typical up front costs people are used to thinking of. Scary stuff? You bet.

    • says

      Hi Deborah, Well, it depends really. If you have that credit card spending and your finances under control then there is no problem with spending $3-$5 on your favorite latte. But the finances need to be secure first! thanks for commenting again, glad to see you coming back!

  8. says

    Completely agree with this whole thing! You need to pay off the highest interest rates first, get rid of the bills with all that money you’re throwing away! Then once you pay something off, use that monthly amount to go toward the next bill and pay that off. Slowly but surely you can get out of the hole, you just have to be disciplined and stop thinking you need your starbucks, lol! And thank you for mentioning stopping smoking and drinking. Biggest waste of money ever. Great Article!!

    ~Lisha

    • says

      Thanks Lisha, Very good points you have made here. thanks for commenting. I would like to see more of your comments here on ATP. Thanks again Lisha.

  9. says

    For me having a credit card is not that bad, as long as you’re responsible enough to handle it efficiently. Whenever I use my credit card, I’d make sure to pay it off at the end of the month so I won’t be trapped at the loophole of interest.

  10. says

    I do agree with you, Dave, I to do not like opening up new credit, this is why more people are struggling to stay ahead of their payments, they have to many forms of credit.

    • says

      You are right. Yet, if things become desperate, people will do it. This is where the problem starts. if you can avoid doing it, that would be the best. I’m glad that you are able to Les.

  11. says

    Hi Dave,

    My wife and I get those offers all of the time.. we just never need them and I’d rather use my ‘credit’ to get cards that will help me get free airline miles. I would say we get 1-2 offers each week, usually from the same companies/banks.

    • says

      That is the interesting thing about those offers – they typically want those who don’t need them to sign up. I think they got tired of sending them to me though, I have not seen one for a good while.

  12. says

    Hi Dave, I know what you mean when you say running a monthly balance on your credit card is a path to a bad end. Used responsibly credit cards can be a great asset, but once you start incurring interest charges it can be very hard to keep up.

    • says

      Hi Bethany, That is absolutely true. It is rather difficult for people. Once you get into a debt hole, it is tough to get out. Scary stuff. Thanks for your comment Bethany!

  13. says

    I qualified for a zero percent interest transfer to one of my credit cards. 12 months without paying interest helped me pay down my debts much faster than if I was paying interest and principle. So if you can qualify or have the opportunity to transfer your debts to a 0% interest card do it! I paid 3% of the transferred balance or $300 on a $10,000 transfer.. well worth paying 0% for 12 months.

    • says

      Hi Derek, That is an excellent point. If you can save yourself some cash on a hefty principle it is certainly a good deal. I remember in the past that companies used to compete with each other in this way. After the twelve months was over, you had offers from 10 other companies to do the same. That way, you could keep your 0 interest loan for a long time.

      I haven’t seen any of those offers recently, have you?

  14. says

    I’ve been avoiding getting a credit card for years and years because I’m so worried about all this credit rating stuff. I keep thinking about just getting one and putting my phone bill on it so that I can build up a good rating for the future!

    • says

      That could work. I would suggest that it might be a good idea to pay that bill every month and not let it go for any reason (if possible) Thanks for stopping by and leaving a comment Harriet

  15. says

    Hi Walter, many people have this major problem in their lives, this is one of the reasons that I thought it was important to talk about. I hope your friend can find his way out of that mess. Thanks for dropping by.

  16. Penny says

    My dad tried to teach me the responsible way to use a credit card before I ever got one and I thought he was full of it like any other teenager and their parent. Now that I’m in credit card debt up to my eyeballs I really wish I’d listened because oddly enough his advice was exactly this same advice. Thank you for posting this, I hope all the young people out there will listen.

  17. says

    Thanks Rebecca, I think the lessons of credit are one that hit us a lot here in the US. Many other countries simply do not have the credit excess that we enjoy in the US – sometimes to our detriment as you are fully aware now… stay on track. Thanks for dropping by.

  18. says

    Hi Lisa, sometimes it takes a bad experience to make it hit home. When we are young we all face the same lack of awareness. Life experience is important. Hopefully, when you get through your current mess you will have a whole different and wiser perspective.

  19. says

    Thanks for dropping by Frank. Although I would say this post was more about staying out of trouble in the first place, it can help when credit is restored as a reminder to never go overboard again.

  20. Donnell says

    Our greatest enemy has never changed. Its name is ignorance. And the greatest ignorance of all is the mistaken belief that we can ever receive more than we truly earn. Sooner or later, there must be an accounting. Every day, for good or bad, we’re throwing the boomerang of credit. And we should always keep in mind that the punishment (the interest payment) always is greater than the spoils (the items we decide to buy).

    • says

      I agree with you 100% Donnell. Ignorance is not bliss and it leads to a lot of problems. I also like what you have to say about the fact that we cannot continually take without giving. This is true. Credit cards can be helpful but they must be used responsibly Thanks for stopping by Donnell..

    • says

      Hi Jocuri, yes many people feel that way, and I don’t blame you at all. If you can avoid using them, you are probably better off.

      Thanks for stopping by and leaving your comment

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