Using a Credit Card Wisely
Using a credit card wisely means planning when and where you’ll use
it.
More than anything, avoid using your card for impulse purchases. These images
fill credit card ads on TV and elsewhere; but a spontaneous Christmas gift
shopping spree is the worst use of a credit.
Another good thing to avoid is…anything your card issuer tries to
sell you. Credit card companies work hard to offer all kinds of products
and services to extract money from their customers.
Take credit card theft insurance, for example. You don’t need this.
If your card is stolen, you’re only liable for a maximum of $50 worth
of purchases.
Credit card disability insurance is another loser product. If you can actually
get your credit card company to activate the insurance in the event you become
disabled (and it’s not easy, typically), your debt still keeps piling
up. Plus, your credit card becomes disabled right along with you; you can’t
make any additional charges on it.
Pre-paid gift credit cards can be another money-loser. In this case, the fees
you pay make them worth less than what you paid for them. And they often expire
quickly, which means the recipients may not even have a chance to use them.
You’re usually better off giving cash, a check or gift card from a
retailer, since those cards typically do not have expiration dates or hidden
fees.
Generally, it’s not a good idea to use a credit card for buying gifts
of any sort. Buy gifts with cash (or cash equivalents, like checks or debit
cards). This may sound slightly Scrooge-like; but borrowing money to buy
things you’re giving away doesn’t make much financial sense.
And, speaking of hidden fees, you should think twice before using your credit
card abroad. It saves you having to exchange currency; but some Visa and MasterCard
issuers have started charging a 2 percent fee on credit card purchases outside
the United States—on top of the 1 percent charged as a currency exchange
fee.
Those fees can add up, especially on a longer vacation. So, make sure that
you carry cash equivalents like debit cards or traveller’s checks if
you’re planning to go abroad.
Next: Debit Cards |
