CHARLESTON AIR FORCE BASE, S.C. –
Today, credit is a way of life and plastic has evolved into the currency of choice. Your credit can determine what kind of car you drive, what neighborhood you live in and in some cases, whether or not you get the job you want.
We have gotten away from the most basic way that you can pay for things, cash. Cash is simple and accepted almost everywhere, but there are times you will need to use a check or credit/debit card. I like to use a rule of thumb: if it is $20 or less I pay cash for it. You want to limit using your credit card for situations where cash in not suitable.
With so much riding on your ability to manage debt and pay bills on time, it's important to learn as much as possible about how to establish and maintain good credit.
I have found credit cards can be a financial tool if used properly. A major reason you get credit cards is that they enable you to make purchases easier, quicker and online. However, debit cards can also be used this way.
I have seen two kinds of people who use credit cards. One of them keeps a revolving balance on the card and the other one pays it off in full every month. The second user is called a "convenience user," because he or she uses the card for its benefits and never pays interest. This is the kind of user you want to be.
Probably the most important long-term value of a credit card is that it can help you establish a credit history. By using a credit card regularly and paying it off on time and in full, you're demonstrating that you're capable of handling borrowed money responsibly. That's good news for lenders.
Be aware of credit card interest rates as they can eat you alive. While some cards offer introductory rates of zero percent or only a bit more, even those low rates will eventually change to rates of 10 to 25 percent or more. If you treat your credit card like cash and pay off your balance in full every month, you will never pay a penny in interest.
One way users occasionally get burned is fees. If your payment is late, you're sure to get slapped with a heavy fee; likewise, if you exceed your credit limit, you'll get penalized. Both of these problems can be avoided by using some good habits. Always pay your bill as soon as it arrives or, even better, have it automatically deducted from your bank account.
There's one last thing that many people associate with credit cards: overspending. Many people seem to treat buying something with a credit card as if it were "free money," instead of treating it like a cash purchase. This can lead to some pretty grim consequences. That's one reason why you always want to pay the credit card bill promptly. Writing that check brings home the reality that these were real purchases!
You must learn to think of any purchase, as made with "real money" whether it is cash, check or credit.