Since the introduction of the credit card, consumers have had the option of “swiping” for their purchases. However, ownership of a credit card is a responsibility on the level of handling cash and, if not treated with care, could result in serious debt. With the advent of pre-paid credit cards and online shopping, there are more options than ever to spend your hard-earned cash. In this article, Pursuit of Passion takes you through some ways to avoid making common credit card mistakes.

1. If you really need it, choose the card that’s right for your needs

First things first, the big question: Why do you need a credit card? When it comes to credit cards, it isn’t a case of, “one size fits all”, as different banks offer different cards for different customers, each with its own set of perks or rewards. For instance, if you are a frequent traveler, you may want to apply for a card with ties to a major airline, so as to collect flight miles with every transaction. If you’re a regular motorist, maybe a card tied to a major gasoline station in order to earn points every time you fill your tank. Frequent shoppers may want to consider cards affiliated with major retailers in order to receive benefits whenever they visit the stores in question. Whichever one you choose, keep in mind that there’s also an annual fee to pay in exchange for the privilege of having a bank cover your back whenever you need to pay for something.

2. Keep an eye on your charges

Keeping an eye on your finances is something we’ve discussed in the past, and you need to be just as proactive, if not more so, with a card. With the rise of online transactions, identity theft – incidents of other people using your information to make purchases – has become a very real concern. To avoid falling victim, you need to be vigilant on who you share your card information with, as well as make regular checks on your running bill through your bank’s online service. If ever you lose your card or spot a charge on your bill that you didn’t make, call your bank immediately to report the loss and/or challenge the charges. Something else you can do is have the bank set a limit on your card so that, even if someone gets a hold of your information, they won’t be able to run you into poverty before you’re able to question their charges.

3. Stay within a set budget

In handling your credit card, it’s best to think of it as a debit card, in that every cent you spend is money that you’ll never see again. A credit card isn’t a magical shopping card that gets you stuff for free – it’s a legally-binding financial contract that puts you in debt each and every time you use it. The real convenience of the card isn’t in being able to buy thing things you can’t afford, but in having the flexibility to buy things without carrying large amounts of cash around. Bottom line: If you don’t have the cash to pay for something in real life, don’t charge it to your card.

4. Pay your bill on time, every time.

 Your credit rating is a score that comes into play whenever you engage in major financial transactions with your bank, such as applying for a loan. This score is a gauge of your ability to pay back your loan based on payment history with prior or existing debts, such as credit card bills. The best way to ensure a good credit rating is to pay your bills on time, and avoid the trap of paying only the bare minimum on the due date. Paying on time also has a practical advantage – it ensures you don’t have to pay the dreaded financing fee and added interest when the next bill rolls around. Remember, the interest is calculated on the total amount, not just the unpaid balance, and compounded interest can end up creating a larger debt amount than if you had just paid for it all in the first place.

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