Plastic Cards

Using Plastic Cards Wisely

Credit cards, affectionately known as plastic alternatively, can prove to be very useful indeed. They are extremely convenient when a person is shopping practically anywhere. Most every business, store, or even restaurant willingly accepts them nowadays. When times are tight, they can be an essential stop gap to get a person, or even a family, through until the next much needed salary arrives. There are good and bad uses for credit cards, though. Properly used, they can be of great service to people. Poorly used, or even abused, they can ruin a person or a family. This article explores six different ways of using plastic intelligently.

The first positive feature about using credit cards wisely revolves around building up good credit by employing plastic. The key to this is for those who are just establishing credit not to apply for so many cards at once. By beginning smaller and making sure that you are able to pay each and every bill when it is due, you will achieve greater results - and sleep better at night on top of it. Do not simply accept any credit card offer that comes freely and unsolicited in the mail. Read all of the associated terms before accepting and starting to use it. Early in a person's credit history, such pre-approved credit cards are no doubt helpful, but they must come from a known and quality outfit. Such a firm ought to report your credit history with them directly to the credit bureaus. In this way, you are able to build up good credit.

A second good practice in properly utilising plastic involves the ways that you close a credit card account. Experts suggest that it is often better to cut up a credit card and not to use it, then to simply close the account. By closing an account with a no or low balance, you are actually worsening your credit use to available credit ratio, which could actually damage your credit rating.

A third critical factor in wisely utilising credit cards involves cash advances. A real danger with cash advances is the magic money syndrome. This common ailment results from the ease of accessing cash by simply sliding a credit card through a machine and pressing a few simple buttons. Presto! Out comes money, as if by magic. But this money must be repaid, and often at ridiculously high rates of interest and with criminal fees. It is likely that the Annual Percentage Rate you pay for this magically available cash will be substantially higher than charges made in a store. Another factor to remember is that most credit cards make grace periods available on purchases, meaning that you do not pay interest on the amount until after your statement due date, giving you a chance to utilise their money for free, when you pay down the entire balance every month. Not so with cash advances, whose sometimes shocking interest rates begin accruing immediately upon use. When you feel the need to access a cash advance, remember that it is usually cheaper to do so inside of a bank branch than at an ATM. The majority of ATM's charge an extra fee for using a non-proprietary bank issued credit card, while there is no such charge inside most bank branches for this service at a teller window.

A fourth area to consider when intelligently employing plastic centres on balance transfers. No doubt it is sensible to utilise balance transfers to lower the interest rate that you pay on balances which you carry month in and month out. Still, there is no harm in shopping around for the best offer on a balance transfer credit card. Remember too, that if you over-apply for credit cards at any point and time, then it will reflect poorly on your credit report. Before you consider going after a new card or even using one that you presently have in order to engage in a balance transfer, you should think about a few things. How much interest will I pay after the promotional period expires? How long does this promotional interest rate last? Is there a fee for this convenience, and if so, what is it? All of these things should be seriously considered. After all, who wants to be stuck with a twenty-one percent or higher interest rate after their promotional period expires?

A fifth important area to think about in properly using plastic cards concerns whether to pay them off one by one, or a little extra down on each one every month. Once you have gone through all of your various debts and determined the ones with the highest interest rate, you are ready to ponder the answer to this potentially very important question. If you plan to pay a little more than the minimum on one of them, it is typically the most intelligent practice to pay extra on the card with the greatest interest rate. After you have retired that bill, then you could work your way down to the card with the next highest rate. Do not worry about which bill is the largest, focus instead on which one is costing you the most money via the interest rate.

A sixth and final point concerning the intelligent utilisation of a plastic card revolves around rising interest rates. If your rates are high, and are being increased, then it might make sense to pay off the balance using any savings that you have managed to build up. Alternatively, if you can qualify for a none or low interest rate promotional balance transfer offer with either an existing other account or a new one, then use it, only make sure that you pay the newly transferred balance down before the promotional rate expires. Otherwise, you might actually end up paying a higher interest rate than you had before the transfer, once the promotional rate is over.

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