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Put the Scissors Away: Wise Ways to Use Your Credit Card

Getting into a bit of a tight corner with your finances can often result in a radical line of thinking that prompts you to reach for the scissors and cut up your credit card.

Finding yourself in a debt situation is never pleasant. If you find yourself in financial hot water, you need to take some positive steps to rectify the situation, but cutting up your credit card shouldn’t be necessary, especially if you work on using your card sensibly in the first place. Here are some smart strategies for staying out of hot water with your credit card.

right credit cardShop Around to Find the Best Deals

If money is tight or if you are simply trying to find some ways to cut your costs, it is worth looking around to see if you can find a better deal than your existing credit card. Look for a credit card that offers no annual fees, or at least a lower interest rate. This allows you to make some instant up-front savings simply by transferring your balance to another card.

Although you won’t be reducing your debt immediately by moving across to a better deal, you will save money over time. Even a deal that offers a low or zero introductory rate period isn’t going to reduce the amount that you owe right away. Even so, there can be significant savings you can make by switching cards.

For example, if you are paying $100 a month on your current card, and it is made up of $50 for interest repayments and $50 toward paying down the principal amount borrowed, in a year’s time, you will have paid $1,200 – $600 in interest payments and $600 toward reducing your balance.

But, if you take advantage of a zero interest for one year offer, the $600 you use to pay off interest could pay down your balance, instead. That means you can pay down your balance by $1,200 in a year, instead of only $600, simply by taking advantage of such an offer, while continuing to make the same $100 in payments per month.

Watch out for any fees for transferring your balance, as some card companies might make a charge. Any transfer fee over 10 percent of your balance should be considered with caution, especially if you have a lot of balance to transfer. If they apply a moving fee, work out whether the lower interest rate or the interest-free introductory offer still makes switching financially worthwhile.

Use a Credit Card to Clean Up Your Act

Many of us get into financial difficulties at some stage in our lives, but it doesn’t have to be the result of behaving irresponsibly with your finances. Losing your job or falling ill, are just two examples of how your financial situation can quickly be thrown off line, creating a debt situation that wouldn’t have been there in normal circumstances.

When recovering from a financial shock, what you want to do is to be able to persuade the credit providers that you are resolving the situation and given a bit of time, everything should get back to normal.

Even if you have to reset your financial situation and start over, credit cards are a useful way of rebuilding your credit score and demonstrating you can be trusted by lenders.

As you may well know, everything you do when it comes to financial transactions, from loans, mortgages, credit cards and even insurance payments, all gets recorded as part of your credit score evaluation.

Using a credit card responsibly is an effective way of rebuilding your credit score in a timely manner. Paying off your balance each month demonstrates your ability to borrow and repay balances diligently. In time, this method of use can work at boosting your score if you approach it in the right way, so don’t dismiss this option if it is open to you in your situation.

Your Credit Card is an Easier Way to Balance Your Books

There is also a valid argument that if you use your credit for most of your purchases, then pay off the balance when the statement comes in, this can be an easier way to manage your money and work to stick to a tight budget.

Many of us tend to dismiss small amounts of spending as not relevant to our overall financial expenditure, but even that daily cup of coffee on the way to work can add up to a decent sum of money going out of your account each month.

Furthermore, using your credit card as a budgeting tool could help you keep tabs on your spending. You can use your credit card spending history to identify where you can curb your spending, as you get to see all your purchases in one place, rather than having to collect all your receipts to add up at the end of each month.

Take charge of your spending by looking at your purchase history each month. If you use your credit card wisely, it could be much more of an ally than a foe when it comes to sorting out your financial situation.

About Erin Bradshaw

Erin Bradshaw used to regularly max out her credit cards once upon a time, but now is on the road to becoming debt free, she shares her tips and ideas for a financially fit future with like-minded people around the web.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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