Three Horrible Uses For Your Credit Cards

Credit is a present day convenience that many of us cannot live without. It allows us to buy items that are well out of our immediate budget, like a house, a car or even a business. To the ordinary American today, credit is really a necessity.

However, with credit so readily available, along with the downward trends of our economy, credit has turned into a system that is very much abused.



Many Americans just don’t understand how to use credit properly and make it work for their advantage. Regrettably, that sometimes results in individuals using credit for things that do nothing but hurt their credit scores. Like the saying goes, "The road to hell is paved with good intentions." Not knowing how your credit choices can impact you could harm your financial position substantially.

If you have a credit card, there are a few things you have to consider to help utilize it for what it really was intended for - improving your credit score.



Never use your credit card for pulling cash out of the ATM.

Think you need that cash ASAP? Reconsider that thought. Usually when you use your credit card to take cash out of an ATM, you’re being charged twice. You’re charged once for your ATM fee, and again with all the interest on your credit card. Believe it or not, most people don’t understand that credit card cash withdrawals are not qualified for interest-free periods. Therefore you begin getting billed interest from the first day. In addition, you’re very likely to get charged a more significant interest rate on cash advances than on normal purchases. Your $100 dollar cash advance swiftly spirals into a significantly higher amount. Should you have any other option, it’s most likely far better to get the money you want a different way.



Simply say NO to retail credit cards.

The appeal of saving 10% - 15% off your purchase can be quite a strong one. How often have you been offered such a discount on your purchase at a retail store if you apply for their store credit card? Have you paused to consider why they are really pushing these deals if it’s such a "savings" for you personally? Let’s break it down.

When you are late with a payment or only pay the minimal amount, the interest rate of retail store credit cards can be substantially more than regular credit cards. Retail stores send promotions and offers to get you to spend more at their store. Often, you’ll just put it on your card and keep accumulating debt. Remember that it hurts your credit when your balance exceeds 30% of your credit limit.

Lastly, your credit score is determined by active credit. If you get a card from a store that you simply don’t frequent, you’re not providing good credit history and hence the credit card becomes a liability. The better option is to pass on the offer of "savings" and, if you really need to purchase something on credit, use a non-store-specific card as an alternative.



Don’t incur more debt by using credit cards to pay bills.

When it comes right down to it, paying a bill on your credit card is going to do a lot more to damage your credit than it will to provide the assistance you seek. The catch is, you’re not really paying anything. You’re simply moving your debt from the company the bill is from to your credit card company. That isn't solving any issues. Not only are you not lowering the debt, you’re running into new debt from the interest on the new balance. In addition, you need to be very careful that transferring your debt from one place to another doesn’t boost your balance to over 30% of your credit limit. Credit cards ought to be used to improve credit, but only on things that improve your financial and private worth - not things that decrease it with added costs.



Learn more about how to fix bad credit and create a high credit score at Phil's site dedicated to giving the facts about credit scoring and personal finance.