At one time in my life I had 12 credit cards. It seems that every store I shopped in offered one and for some reason, I got them. I thought it made me look more grown up or financially savvy. But the truth is, all those cards did for me was get me into debt. It took me a few years, but I got rid of all but two cards and used them very sparingly. I was determined not to get caught up in another cycle of charging, minimum payments, late fees and stress.
I learned about responsible credit card use the hard way, but I hope I can help someone else avoid what I went through.
First, ask yourself the following questions to determine whether or not you’re in credit card crisis:
- Is the chip wearing off on the card? Do you use other credit cards to pay a credit card bill?
- Do you have your card number memorized? (I did!)
- Does your UPS guy delivering Amazon packages know you by name?
- Do you have to think for a few minutes about which card to use when you make a purchase?
- Do you ignore the bills when they come in?
If you answered yes to any of the above, you may be in trouble.
First things first: stop the insanity! It’s time to go cold turkey, put the cards away, and switch to using only cash. Once you’ve done that, you need to learn how to be a responsible credit card user. Here are the valuable lessons I’ve learned over the years:
- Limit yourself to one credit card, at least for a while. Over time, you can increase that to three — 2 general-purpose cards and one store card with a Rewards program.
- Always pay your bills on time to avoid late fees or interest rate increases.
- Take advantage of credit cards with Rewards programs, but only if you pay your entire balance every month. Use it for all your purchases to accumulate points faster. Learn how to save money by using the rewards. Rewards only save you money if you can actually use them — for instance, if they earn you cash to pay down your balance.
- Register on your card’s website so you can easily check your current balance, pending charges and due dates. It’s also a convenient way to check for fraudulent activity.
- Always pay more than the minimum payment — and ideally, the entire balance — each month to avoid accumulating interest charges.
- Don’t take cash advances with your credit card if they have high fees and interest rates.
- Don’t use more than 30% of your available credit to help ensure you maintain a good credit rating by exhibiting responsible credit card use.
- Don’t cancel an old credit card you’re not using, just put it away. Canceling it can lower your credit rating because it reduces your capacity to borrow.
- Don’t sign up for a lot of store cards. They tend to have higher interest rates and it’s hard to keep track of lots of due dates and balances.
Having a credit card offers lots of benefits: it’s safe, accepted everywhere, great for emergencies and helps you establish credit history. So go ahead and get one. But be responsible with your credit card. And promise not to do anything stupid like I did!