As some of you may know already, I started my financial journey using Dave Ramsey's plan to take control of my money. This meant I was very ANTI-credit card for a while. Yes, I was one of those. However, I've loosened the reins on my stance. Having my finances under control and learning how to be extremely disciplined with my family's money, I have become more open to having a credit card again because they can definitely have their benefits. But credit cards are NOT for everyone!
A few years ago, I was at a toy store exchanging one of my daughter's birthday presents for a different size when I overheard a man's situation next to me with
another customer service representative. He was trying to exchange a toy for a more expensive toy and the cashier double-charged him the difference by accident. She got someone to take off the extra charge but the man was approaching his credit card limit and he was EXTREMELY worried that the charge may take a day or two to be removed which would affect other bills he had to pay. He asked for the manager and had lengthy conversations with the employees, practically begging to fix this issue. I finish up with my exchange with no problems, left the store, but felt really sad for this man who was on edge about an accidental extra charge on his credit card causing him all this STRESS because he was close to his limit. Because he needed to pay his bills. ALL BECAUSE OF A TOY!
If you have a credit card, that's fine. I definitely won't shame you for it and tell you you can't have it. HOWEVER, you need to know that credit cards can do one of two things.
They can either bring you extra benefits on items you can already afford to purchase OR they can bring you added STRESS if you are swiping and have the mentality of "pay for it now and worry about it later."
Don't be like this man who was nearly sweating over an accidental transaction because he was approaching his limit. Don't keep swiping that credit card if you can't pay it off in full every month just so you can get a few extra points. It's not worth the stress of having ANOTHER monthly bill.
If you are going to have a credit card(s) in your wallet, make sure you use it wisely with these tips!
1. Budget, budget, budget!
Budgeting is the most crucial step in knowing how much money you have in your control and knowing where every one of your hard-earned dollars is going! Once you have written down your monthly bills and your estimated daily expenses for the month, you will know how much EXTRA money you have to put towards budget-busting items like random expenses. These expenses which may include car repairs, furniture, gifts, home repair, etc. can be a great time to bust out your credit card and get the points/rewards. BUT be sure to BUDGET for that expense so that you KNOW you are spending within your means and not overspending on a specific item.
This behavior forces you to control your money by telling it where it's going and not trying to "worry about paying it off later!"
If you haven't tried budgeting or couldn't get it to stick, read up on how to budget. If you used to budget and fell off the bandwagon, then check out this article.
2. Don't wait!
Another tip to use your credit card WISELY is to pay off your balance before your monthly bill comes in. You do NOT want to have a lingering balance on your credit card that you can't pay off within the month of a purchase because it's an indicator that you are spending more than you are earning. The goal to use credit cards wisely is to keep stress down, pay it off every month, and take advantage of the rewards/points without the haunting balance hovering over your shoulder!
3. Only use your credit card for BIG purchases.
The little coffee shop purchases or fast food runs will add up QUICKLY! By using
your card like this, you'll lose track of how much you've spent. This is a recipe for overspending which leads to stress when that monthly credit card bill arrives! So to avoid this, ONLY use your credit card for large purchase items like furniture, car repairs (i.e. tires), appliances, the next iPhone, etc. If you budget the way I recommend and put your extra money towards these big-ticket items, then once you purchase the item with your credit card, you will have the money saved in a separate account (check out my random expenses blog) to easily pay off the balance before the bill arrives!
4. Don't forget to use your rewards!!
Ok, you like to use a credit card to get extra points and rewards right? I get it
because earning FREE flights or getting cash back feels amazing. So now that you are using your credit card wisely with the above steps, I'm on board with this. BUT don't forget to use the points or rewards that you are earning! Bankrate.com did a study that reported 31% of people did not use their points.
So my only advice for this topic is if you are soooo adamant about using credit cards to earn free rewards, then use the DANG POINTS!
Take-Home Message:
Don't let your credit cards control you! If you can't pay off your bill monthly, control your spending, or use the above tips to use your credit cards wisely, then take the credit card out of your wallet FOR NOW and establish better money habits. I want you to learn how to use your credit cards wisely so they bring you added benefits instead of taking away your hard-earned money from you and your financial goals!
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