Successfully Managing Your Credit

The easiest way to fall into the bottomless pit that is debt is by not knowing how to manage your credit successfully. Credit cards are not given to only those with financial savvy and they don’t come with an instruction manual on how to use them.

The average American has anywhere from five to eight credit cards and can carry a debt of more than $20,000, and for some the number is even higher. Learning the ins and outs of credit management may save you from a bleak financial future and thrust you into the light of financial freedom.

Ignore the Rules of What Financial Institutions Deem Your Acceptable Debt Level

In financial matters, debt to income ratio is a deciding factor in the level of credit you receive. You can carry debt of at least 25% of your income, but is that a wise decision? Keeping your debt to income ratio to a more modest 15% is always advised. Many people live from paycheck to paycheck and if something unforeseen should happen, the amount of debt you carry can send you spiraling downward financially. Just because a credit card has a spending limit of say $10,000, it doesn’t mean you have to charge that amount because as so many forget, the debt must be paid back and you are paying back far more than you borrowed.

Minimum Amount Due

Paying just the minimum amount due on your credit cards will have you beholden to the credit card company for almost your entire adult life. The amount is calculated to keep you paying for many years to come with a profit to the financial institution that is astronomical. Finding the lowest possible interest rate for your credit cards is often not enough. Paying above and beyond the minimum due will have you paying off your credit cards quicker and for a lot less money.

Keep Your Eye on Fees

If they can charge you, they will. Not only do you have to worry about late fees, you need to be aware of many of the other charges that financial institutions try and slip under your nose. If you lose a credit card you will likely have to pay a replacement fee. If you think you are not going to make the due date, paying by phone can cost you too. Credit cards are not required to tell you that the purchase you make is going to put you over your credit limit so you will end up paying over the limit fees until you pay down your debt to the acceptable level.

The convenience check offers you receive in the mail often come with a price tag as well. You may pay a higher rate of interest by using these “convenient” checks that are supposed to allow the card holder to relax and buy what you want and you may also be charged a fee for simply utilizing it.

Most of us don’t take the time to read the fine print when it comes to our credit cards. Being knowledgeable about the many hidden fees you may be charged may save you enough money to send your child to college. Don’t let the financial institutions line their pockets with your money; learn your lessons and charge responsibly.