Save Money By Using Your Credit Wisely

A few years ago, using credit was as natural as breathing for many consumers. This was during a period when consumers were reaping the benefits of a very credit friendly environment. Everyone was issued credit regardless of their ability to repay the debt. This of course backfired for everyone involved from the lenders to the consumers issued credit. Today people are much more leery about using credit which is a good thing as using credit unwisely can wreak havoc on your financial future. Fortunately in these post recession days we are more informed and hopefully more knowledgeable about the proper way to use credit. Here we will review common credit card mistakes which can cost you big time in the long run.

• Using plastic instead of cash- This happens all to often and is one of the easiest ways to rack up debt quickly. Many consumers do not consciously realize how quickly their debt grows when they whip out their credit card to pay for something instead of paying cash. Whether you are between paychecks or simply want to hold on to your cash for a rainy day, this habit can cause severe financial problems if you fail to pay off your debt in full each month. Debit cards can be misused as well, if you don't keep track of your purchases and overdraw your checking account. People who get in the habit of using cash instead of plastic can avoid these problems- after all when the cash is gone, it's gone but you won't be receiving a bill later in the month.

• Making late payments- There are two main reasons for late credit card payments. Lack of funds or lack of organization. In either case you will pay the price for missing your payment date. In this less than credit friendly time, banks are quick to charge higher penalties and increase your interest rate if your payment is made even one day late. Avoid these fees and other negative consequences by paying close attention to due dates and getting your payment in plenty of time. If you are short of funds then you have another issue altogether and you should stop using your credit cards until you are in a position to pay them in a timely manner.
• Cash advances- If you have ever taken a cash advance on a credit card you more than likely know how costly this habit can be. If you are short $20 or $200, you may think taking a cash advance is a quick solution to your immediate problem. While this might be the case you will pay for this convenience. Interest rates on cash advances are astronomical which means you will pay back that money plus more, especially if you do not pay your balance in full.
• Not understanding how credit and debt work- The number of credit card holders who simply do not understand the terms and conditions which they agree to is astounding. Consumers who do not understand how credit and in turn debt affect your finances are often surprised to find how difficult it is to pay back high balances. Simply "having" credit does not mean you can afford to run up huge balances which you cannot afford to repay. Once you have incurred too much debt, the road to recovery is long and fraught with many obstacles. When it comes to managing credit, knowledge is power.

The credit card industry has experienced a lot of changes with more to come in a few weeks. It is imperative you understand how to manage your credit card use wisely or risk paying hundreds if not thousands of dollars in interest, fees and penalties.